SALE  OF  INVENTIONS 


INVENTIONS 

THEIR    DEVELOPMENT,   PURCHASE 
AND  SALE 


BY 

WILLIAM   E.  BAFF 

PATENT  ATTORNEY 


NEW  YORK 

D.   VAN   NOSTRAND    COMPANY 

25  PARK  PLACE 

1920 


COPYRIGHT,    1Q20 
D.     VAN    NOSTKAND    COMPANY 


PREFACE 

THIS  book  is  essentially  a  manual  on  the  market- 
ing of  inventions,  and  it  is  proposed  to  view 
the  subject  from  various  angles,  proceeding 
from  the  less  obvious  to  the  known.  In  its  broader 
aspect  it  is  a  book  on  business  policy  and  is  sent  out 
on  its  mission  of  enlightening  inventors  and  others 
about  plans  by  the  aid  of  which  inventions  may  be 
profitably  exploited. 

It  is  intended,  however,  not  alone  for  the  ordinary 
layman  without  experience  and  worldly  wisdom  but 
for  busy  people  in  every  line  desirous  of  understand- 
ing the  nature  of  patent  property  in  inventions.  The 
difficulty  has  been  to  confine  the  book  within  proper 
bounds  and  still  leave  nothing  out  which  is  necessary 
for  passing  judgment  upon  any  invention,  either  from 
the  standpoint  of  the  originator  or  of  the  capitalist, 
investor,  or  manufacturer  interested  in  working  in- 
ventions. 

The  problems  discussed  are  the  manufacturers' 
problems  as  well  as  those  of  the  individual  inventor 
seeking  to  enlist  capital  for  his  new  undertaking  or 
to  start  a  new  business  founded  upon  a  new  and  use- 
ful invention. 

The  most  potent  word  in  our  business  vocabulary 
today  is  efficiency.  Efficiency  is  simply  a  high  ratio 
of  results  to  means.  Increased  efficiency  depends 
almost  wholly  on  increased  knowledge.  The  fallacy 
is  now  recognized  of  letting  each  man  go  along  in 

V 

435194 


vi  Preface 

his  own  way  and  produce  business  by  using  only 
his  own  methods.  This  is  a  book  to  show  one  how 
to  use  the  efforts  of  others  to  the  best  advantage  in 
order  to  become  a  dominating  factor.  It  is  in  sum 
and  substance  primarily  written  for  the  average  man  — 
for  plain  folks,  not  for  geniuses.  Geniuses  do  not 
need  guiding.  The  idea  of  Wanamaker  is,  "  All 
may  help,  none  shall  hinder."  The  aim  of  this  book 
is  to  standardize  the  best  way,  the  best  thing,  the  best 
thought  and  see  that  all  inventors  know,  practice, 
and  use  them. 

In  so  far  as  it  teaches  the  paramount  necessity  of 
self-help,  the  suggestions  made  are  of  practical  value, 
and  in  so  far  as  it  discloses  plans  showing  how  to  use 
the  efforts  of  others  to  the  best  advantage,  the  in- 
junctions given  are  indispensable.  The  majority  of 
people  have  realized  that  the  growth  of  income  is  not 
keeping  pace  with  the  growing  cost  of  living.  The 
man  who  never  tried,  never  helped  himself  or  any 
one  else.  The  man  who  never  made  a  mistake,  never 
made  anything  else.  The  capitalist  is  ever  sharpen- 
ing his  eye,  spurring  his  ambition,  and  setting  his 
mind  to  the  task  of  increasing  the  income  side  of  the 
ledger.  He  is  keenly  on  the  alert  for  the  knock  of 
opportunity  when  it  comes.  And  then  he  is  fore- 
armed and  sensible  enough  to  investigate,  to  search 
into  its  good  features  and  its  bad:  to  examine,  analyze, 
and  decide. 

George  Westinghouse  first  called  on  Vanderbilt 
to  submit  his  airbrake.  He  was  turned  back  with 
the  rebuke,  "  I  have  no  time  to  waste  on  new  ideas." 
That  remark  cost  Vanderbilt  millions.  That  policy 
has  had  its  day.  It  never  pays  to  refuse  to  investigate. 


Preface,  vii 

The  knowledge  herein  recorded  was  obtained  by  busi- 
ness men  after  the  hardest  knocks,  and  they  were 
years  and  years  accumulating  the  experience  that  is 
the  reader's  for  a  few  hours'  study. 

Today,  to  be  a  success  means  constant  study. 
Every  line  of  activity  will  furnish  ideas  that  one  can 
use  in  one's  business.  The  more  serviceable  knowl- 
edge one  possesses,  the  better  equipped  will  one  be 
to  win  out  in  business.  Life  is  a  constant  struggle 
anyway.  It  is  good  for  people  to  strive,  even  des- 
perately if  need  be,  for  a  certain  goal.  When  attained, 
it  will  be  appreciated.  Try  to  dispose  of  a  patent  in 
the  right  way,  and  it  will  not  be  difficult  to  succeed. 
It  takes  strength  and  power  to  get  up  and  "keep  on 
plugging"  with  the  determination  to  win  after  you 
have  fallen  down  in  the  race.  But  armed  with  con- 
crete knowledge,  there  is  no  reason  why  the  inventor 
should  not  succeed.  Guessing  is  worse  than  useless. 
Germany  has  lost  the  war  because  she  regularly  mis- 
guessed  everybody. 

Patents  are  peculiar  property  and  inventions  are 
peculiar  things.  A  patented  article  differs  from  or- 
dinary commodities  in  that  it  has  easily  discernible 
characteristics  of  invention.  It  is  not  like  bulk  goods, 
which  have  no  individuality.  By  its  very  individ- 
uality and  superiority  it  commands  recognition  and 
demand;  on  account  of  its  individual  qualities  it 
becomes  known  and  its  value  becomes  established 
in  the  mind  of  the  interested  public.  If  a  man  owns 
a  patent  on  an  invention  greatly  needed  by  the  public, 
he  is,  on  the  average,  pretty  certain  to  begin  its  manu- 
facture as  soon  as  he  reasonably  can.  He  must,  how- 
ever, go  with  and  not  against  the  stream. 


viii  Preface 

In  order  to  avoid  costly  mistakes  and  not  court 
failure,  it  is  necessary  to  begin  right.  If  a  large  num- 
ber of  inventions  patented  in  this  country  since  the 
dawn  of  patents  have  failed,  the  following  may  have 
been  any  of  the  reasons: 

1.  The  claims  of  the  patent  were  weak. 

2.  The  invention  would  not  work. 

3.  The  cost  of  manufacture  was  too  great. 

4.  The  idea  was  feebly  patentable  but  not  suffi- 

ciently new. 

5.  There  was  no  demand  for  the  invention. 

6.  The  big  fellows  froze  it  out. 

It  takes  hard  work  to  market  inventions,  yet  almost 
every  patent  contains  the  germ  of  a  successful,  mar- 
ketable device.  Men  have  stopped  too  soon,  or 
wasted  effort  and  energy  while  staring  success  in  the 
face.  Few  think  of  the  hardship  which  every  electric 
light,  every  piece  of  steel,  every  pane  of  glass,  every 
telephone  represents.  It  takes  knowledge  to  make  a 
business  man,  but  it  takes  genius  to  make  an  inventor. 
An  inventor  can  invent  and  sell,  while  a  business  man 
can  only  sell.  If  one  works  for  $15  per  week,  one 
probably  would  never  save  in  one's  whole  life  $3000. 
That  is  why  men  invent;  inventing  is  a  step  toward 
increasing  income. 

Such  is  the  power  of  salesmanship  and  advertising 
today  in  creating  the  demand  for  patented  things  that 
people  do  not  call  inventors  fools.  After  all,  the 
flying  machine  is  the  living  evidence  that  a  "  fool " 
invention  may  possess  invaluable  worth;  flying  ma- 
chines have  helped  to  win  the  present  war. 

It  is  hoped  that  the  reader  will  find  the  precautionary 
pointers  about  preparing  a  patented  article  for  the 


Preface  ix 

market,  estimating  the  value  of  patents,  creating  the 
market,  and  disposing  of  inventions,  instructive,  and 
those  portions  of  this  work  bearing  on  advertising, 
salesmanship,  and  contract  law,  helpful,  in  answering 
any  of  the  thousand  questions  that  arise  during  the 
interval  between  patenting  and  disposing  of  an  in- 
vention. 

A  word  about  the  various  methods  considered 
looking  toward  raising  capital  to  work  inventions. 
How  to  raise  capital  to  push  an  invention  is  the  peren- 
nial question.  This  is  what  every  inventor  is  after. 
Two  prime  considerations  control,  business  and  ad- 
vertising. The  one  without  the  other  is  an  anomaly. 
If  the  inventor  has  capital  of  his  own  to  dispense  with 
assistance  from  others,  he  is  truly  fortunate.  In  the 
vast  majority  of  cases,  however,  the  invention  requires 
Jthe  interesting  of  investors.  The  question  is  how  this 
may  best  be  done.  Raising  capital  is  simply  the  art 
of  selling  the  investor  something,  the  very  purchase 
of  which  carries  with  it  an  obligation  to  take  you  as 
a  partner.  It  is  therefore  saksmanship  —  no  more, 
no  less.  Genius  can  always  raise  capital.  This  book 
is  intended  to  help  the  preoccupied  workaday  world 
to  get  its  share  of  earthly  goods  by  study,  application, 
and  hard  knocks. 

Nine  tenths  of  those  inventions  which  are  sold  are 
sold  outright.  The  public  must  be  reminded  that 
inventions  save  money  for  the  public.  The  public 
pays  nothing  for  them  —  pays  nothing  for  the  devel- 
opment. The  inventor  must  be  reminded  in  case  of 
any  doubt  as  to  the  importance  of  the  consumer  in 
marketing  inventions  that  many  good  firms  exploiting 
a  new  and  good  article  have  been  able  to  improve 


x  Preface 

the  quality  of  their  goods  because  the  public  have 
been  with  them  and  given  them  a  chance,  whereas  if 
they  had  not  done  so,  these  firms  would  have  been 
compelled  to  go  out  of  business. 

The  manufacturer  of  patented  articles  naturally 
serves  the  consumer.  A  manufacturer  is  usually 
anxious  to  serve  the  consumer  in  his  best  interests. 
As  a  rule  that  is  the  best  business  policy  for  him  to 
follow. 

The  dealer  has  got  to  make  a  clear  profit  on  an 
article,  or  he  cannot  be  expected  to  push  patented 
goods.  It  actually  costs  the  dealer  today,  taking 
all  lines  and  bulking  them  together,  seventy  (70)  cents 
out  of  every  dollar  for  goods  and  thirty  (30)  cents 
in  addition  to  this  seventy  cents  for  overhead  expenses, 
or  the  cost  of  doing  business. 

In  the  logic  of  facts  the  capitalist  or  moneyed  man 
comes  last  of  all,  not  first  of  all,  in  deciding  the  market 
for  any  patented  articles.  The  money  interests  are 
looking  for  men  of  character  and  not  for  money  to 
start  industries,  and  character  in  an  inventor  is  his 
best  asset,  for  it  takes  years,  amidst  prosperity  and 
misfortune,  to  build  up  character.  At  a  public 
appearance  of  J.  Pierpont  Morgan,  before  a  com- 
mittee of  Congress,  some  one  asked  him  how  he 
determined  to  whom  to  make  loans.  He  said:  "  The 
first  thing  I  want  to  know  about  is  the  man's  character. 
I  have  loaned  millions  to  men  who  had  little  property 
and  I  have  denied  millions  to  men  who  had  ample 
security." 

However  this  may  be,  it  is  only  after  the  inventor 
has  made  a  mark  in  the  world  that  money  will  flow 
to  him  from  capitalists,  and  while  every  inventor  is 


Preface  xi 

not  an  Edison,  a  good  invention  may  reasonably  war- 
rant the  expectation  of  commercial  success.  A  manu- 
facturer of  an  article  first  puts  his  goods  out  as  an 
experiment.  He  does  not  know  whether  he  is  going 
to  make  money  or  not.  He  may  spend  $50,000  or 
he  may  spend  $500,000  in  supplying  such  articles  and 
still  make  no  money.  The  article  may  not  be  good 
enough  for  the  public. 

W.  E.  B. 

WORCESTER,  MASS. 
Nov.  i,  1919 


CONTENTS 

CHAPTER  PAGE 

I.    VALUE  AND  PBICE  OP  PATENTS i 

n.  GAUGING  THE  MERITS  OF  AN  INVENTION  ....  21 

m.  TYPES  OF  INVENTIONS  (THE  COMMERCIAL  SIDE)  .  .  31 

IV.  GLEANING  THE  TALKING  POINTS  OF  INVENTIONS  .  .  35 

V.  How  PATENTS  EXCLUDE;  PRACTICAL  EXAMPLES  .  .  41 

VI.  DEVELOPING  INVENTIONS 51 

VIE.  SUCCESS  IN  INVENTING  ..  .  .  .  ^  .  .  .  .  56 

Vm.  THE  DEMAND  FOR  INVENTIONS 61 

IX.  THE  MARKET  FOR  INVENTIONS  . 77 

X.  PATENTS  AS  PROPERTY .  92 

XI.    INVENTIONS  AND  INVESTORS     ........  95 

XII.  INVENTOR  AND  CAPITALIST  ........  105 

XIII.  OPPORTUNITIES  FOR  INVESTMENT  AND  FACTS  ABOUT 

INVESTORS .     .    >    »     .  112 

XIV.  THE  PRESENTATION  OF  THE  INVENTOR'S  PROPOSITION.  118 
XV.    METHODS  OF  MAKING  SALES    ....".*..  125 

XVI-    CLOSING  WITH  INVESTORS .  140 

XVII.    RAISING  FUNDS — THE  RIGHT  WAY  vs.  THE  WRONG 

WAY — WHAT  PLANS  TO  ADOPT 148 

XVIII.    ADVERTISING  FOR  CAPITAL  LEADING  UP  TO  A  PARTNER- 
SHIP OR  CORPORATION     .    \ .,  .     i,     ...     .     .  167 

XIX.    SALESMANSHIP  AND  BUSINESS — GENERAL    CONSIDER- 
ATION   .     .     .     .     ...     ...     .  '.     .     .  184 

XX.    SIZING  YOURSELF  UP  AS  A  BUSINESS  MAN      .     .     .  190 

XXI.    ELEMENTARY  CONTRACT  LAWS      .     ...    .     .  '  .  196 

XXII.    MISTAKES  OF  INVENTORS        .    .     .     ,     .    .    V   .  204 

XXHI.    THE  SAFETY  VALVES  OF  MARKETING  INVENTIONS.     .  207 
XXTV.    SUGGESTIONS  FROM  THE  AUTHOR  ON    EVERY   PHASE 

OF  SELLING  INVENTIONS 212 

INDEX  221 


SALE  OF  INVENTIONS 

CHAPTER  I 
VALUE  AND   PRICE  OF  PATENTS 

"TIT  TE  assume  one  has  a  patent  issued  to  one  by 
\/\/  the  United  States  Patent  Office  on  an  inven- 
tion which  will  sell.  What  is  the  patent 
worth?  What  is  its  cash  value,  as  near  as  it  can  be 
estimated? 

Whether  one  sets  his  own  price  or  it  is  named  by 
his  backer  makes  no  difference,  for,  like  water,  patent 
prices  tend  to  maintain  their  own  level.  It  is  not 
easy  to  fix  the  price  of  a  patent  even  when  knowing 
the  characteristics  and  model  conditions  which  give 
it  value.  In  buying  real  estate,  one  would,  before 
accepting  the  deed,  make  oneself  conversant  with 
every  advantage  and  disadvantage  which  the  property 
possessed.  But  a  patent  is  peculiar  property  and 
should  not  be  confused  with  the  invention  the  patent 
is  designed  to  protect.  The  invention  is  one  thing, 
the  patent  another  thing;  the  selling  price  of  an  in- 
vention is  not  the  selling  price  of  the  patent. 

A  patent  does  not  give  an  inventor  a  right  to  make 
and  sell  his  own  invention.  This  is  a  nice  perception. 
He  always  had  and  has  this  right,  patent  or  no  patent. 
A  patent  simply  gives  an  inventor  the  right  to  exclude 
others  from  making,  selling,  and  'using  his  inven- 
tion. It  makes  the  inventor  master  of  his  own  domain, 
and  if  he  chooses,  he  does  not  have  to  make  his  inven- 
tion at  all.  But  this  right  to  exclude  others  is  or  may 


*  Sale  of  Inventions 


be  priceless.-  fi  one  sells  goods,  one  would  naturally 
want  to  shut  out  competition.  Wouldn't  one  like  to 
make  every  one  buy  at  one's  store?  That  is  the  way 
to  accumulate  profits  quickly. 

The  output  of  all  the  gold,  silver,  and  diamond  mines 
in  the  world  does  not  equal,  in  value,  the  profits  earned 
from  American  inventions.  It  is  not  correct  to  say 
that  a  patent  gives  value  to  an  invention,  because  it 
only  secures  exclusively  to  the  inventor  the  value 
which  the  invention  already  possesses.  Therefore, 
in  addition  to  owning  a  patent  one  must  have  an  in- 
vention which  will  sell.  The  possession  of  a  strong 
patent  lies  at  the  root  of  every  valuable  invention. 
A  strong,  clean-title  patent  is  the  foundation  of  wealth 
and  fortune  in  inventing.  If  one  has  an  excellent 
invention,  but  one's  patent  claims  are  weak,  the 
chances  of  making  profits  are  very  slight.  Now  in- 
asmuch as  no  inventor  can  tell  how  valuable  his  in- 
vention may  become  in  future  years,  however  spirit- 
less it  may  seem  offhand,  it  follows  that  everything 
should  be  sacrificed  to  obtain  a  good,  substantial 
patent  on  the  invention.  No  matter  what  the  meri- 
torious invention  is,  good  patent  claims  can  be  ob- 
tained to  protect  it,  and  when  obtained,  they  will 
determine  the  measure  of  protection  accorded  the 
inventor.  Otherwise  there  will  be  nothing  to  boast  of. 

To  show  the  utter  futility  of  trying  to  realize  profit 
from  any  invention  without  obtaining  the  right  kind 
of  patent  protection  thereon,  it  may  be  added  that 
the  nature  and  qualities  of  an  invention  determine 
its  excellence  and  merit:  The  merit  of  an  invention 
bears  on  the  amount  of  public  favor  it  generates;  the 
nature  of  public  favor  affects  the  demand  for  an  in- 


Value  and  Price  of  Patents  3 

vention;  the  demand  controls  the  market;  the  market 
is  affected  by  competition  or  its  absence;  competition 
generally  determines  how  many  shall  divide  the  profits, 
and  a  patent  spells  out  the  possible  amount  of  com- 
petition that  may  be  expected. 

The  price  paid  for  a  patent  will,  therefore,  not  be 
confused  with  the  price  charged  the  consumer  for 
purchasing  the  article  patented.  The  cost  of  manu- 
facturing a  patented  article  does  not  control  the  cost 
to  the  manufacturer  of  the  patent  rights,  but  the 
cost  of  patent  rights  to  the  manufacturer  determines 
the  manufacturer's  share  of  profits  after  deducting 
the  cost  of  manufacturing  the  invention. 

The  better  the  invention,  the  greater  the  demand; 
and  the  greater  the  demand,  the  fiercer  will  competi- 
tion be,  unless  a  patent  shuts  out  competition.  There- 
fore it  is  safe  to  say  that  the  more  merit  an  invention 
has,  the  smaller  will  be  the  price  paid  for  the  patent 
if  it  does  not  check  competition;  but  if  the  patent 
does  stop  competition,  then  the  price  paid  for  the 
patent  is  bound  to  go  up. 

The  invention  and  the  patent  must  both  be  good. 
What  is  and  what  is  not  good  may  be  elusive  and 
defy  analysis,  but  to  illustrate,  we  will  give  a  general 
test  by  which  one  can  "  tell."  The  cost  of  introduc- 
ing a  patented  article  —  however  superior  to  other 
articles  —  into  the  market  must  be  deducted  before 
positive  elements  enter  into  the  make-up  of  the  price 
to  be  paid  for  the  patent.  So  an  invention  may  be 
good  and  yet  not  as  good  as  it  seems.  Similarly  the 
cost  of  maintaining  infringement  suits  will  lessen  the 
manufacturer's  profits,  so  that  a  patent  may  look 
good  and  turn  out  to  be  bad.  One  must  not  look  only 


4  Sale  of  Inventions 

on  one  side  of  the  shield.  Whether  it  is  a  poorly  pay- 
ing invention  or  a  poorly  protecting  patent  standing 
in  the  way  of  profit,  one  can  generally  find  out  by  inves- 
tigating and  without  spending  much  money,  assuming 
again  that  the  invention  will  sell  at  all.  It  is  the 
purpose  of  this  book  to  show  how  to  do  this. 

It  is  purely  a  business  proposition  to  estimate  the 
price  of  an  invention.  There  should  be  no  miscalcu- 
lation. When  a  manufacturer  buys  an  invention, 
he  is  seeking  value  received.  His  only  consideration 
is  whether  he  can  make  a  profit  from  the  sale  of  the 
invention  over  the  price  paid  for  the  patent,  plus — 
what  the  inventor  usually  neglects  to  realize  —  the 
investment  in  tools,  machinery,  and  the  cost  of  intro- 
ducing the  invention.  He  does  not  want  to  buy  a 
blunt  tool. 

Every  buyer  of  a  patent  who  intends  to  manufacture 
under  the  patent,  tries  to  discount  the  future.  There 
must  be  clear  gain  looming  in  the  distance.  His  bid 
is  not  based  on  the  profits  he  expects  to  make  the  first 
year  but  after  the  expiration  of  a  certain  number  of 
years.  His  effort  is  to  wipe  out  the  cost  of  a  patent 
through  his  profit  as  soon  as  possible.  He  naturally 
supposes  that  the  chances  are  more  than  even  that 
some  other  inventor  will  obtain  the  same  results  by 
some  other  method,  if  not  by  a  servile  imitation.  In 
such  event  he  cannot  hope  to  prevent  competition. 

To  cut  out  competition  for  the  present  or  for  the 
future  is  an  important  consideration  in  any  industry 
working  under  a  patent.  Patents  are  purchased  be- 
cause they  are  directed  to  prevent  competition,  and 
it.  is  always  a  question  just  how  much  competition  a 
patent  will  prevent.  One  patent  may  infringe  another 


Value  and  Price  of  Patents  5 

patent;  in  most  cases  a  later  patent  can  or  may  in- 
fringe an  earlier  patent,  but  in  some  cases  an  earlier 
patent  may  infringe  a  later  patent. 

A  patent  defines  the  "  boundary "  between  one 
patent  and  invention  and  another  patent  and  invention. 
The  patent  attorney  and  the  examiners  in  the  United 
States  Patent  Office  cooperate,  while  an  application 
for  patent  is  pending,  to  make  a  survey  so  as  to  fix 
this  "  boundary."  No  inventor  has  the  right  to  ask 
for  more  protection  than  he  is  entitled  to  receive; 
certainly  not  to  seek  to  cover  and  protect  a  device 
or  construction  already  patented,  or  perhaps  not  con- 
sidered as  patentable  at  all.  The  Government  says 
to  every  inventor:  "  Present  your  claim  or  claims; 
write  out  a  description  of  the  particular  thing  or  parts 
of  a  thing  or  article  you  claim  to  have  invented;  state 
clearly  and  accurately  what  it  is  you  claim  is  new  and 
what  you  would  prevent  others  from  making,  using 
and  selling,  after  you  get  your  patent."  The  patent 
virtually  gives  one  a  swimming  belt. 

The  Patent  Office  represents  every  patentee,  living 
or  not  living;  the  patent  attorney  represents  the  par- 
ticular inventor.  Views  are  exchanged  as  to  how 
much  protection,  if  any,  should  be  accorded  an  in- 
ventor. The  Patent  Office  will  attempt  to  reveal  to 
the  patent  attorney  every  patented  device  of  a  similar 
nature  to  the  one  upon  which  claim  for  protection  is 
asked  and  request  him  to  see  to  it  that  no  claim  is 
asked  which  would  trespass  upon  some  previous  pat- 
entee's rights. 

Of  course  mistakes  are  sometimes  made  by  the 
Patent  Office  officials  in  granting  patents  which  in- 
fringe other  patents,  but  this  is  rare.  The  Government 


6  Sale  of  Inventions 

does  not  guarantee  any  patent  it  issues,  does  not 
assure  the  inventor  that  it  may  not  infringe  some 
later  or  earlier  patent.  But  on  its  face  every  patent 
shows  that  some  inventor  has  been  accorded  protec- 
tion on  an  apparently  new  and  original  invention. 

Suppose  the  patent  which  was  issued  for  the  first 
phonograph  claimed  protection  on  means  for  record- 
ing sounds,  not  specifying  how  the  sounds  were  pro- 
duced or  in  what  manner  recorded.  The  Patent 
Office  is  then  asked  to  grant  the  inventor  a  monopoly 
on  any  mechanism  for  recording  sounds.  Represent- 
ing all  previous  patentees,  as  the  Patent  Office  does, 
it  calls  attention  to  the  previous  patents  on  telegraphy, 
where  means  are  also  provided  to  record  sounds.  The 
telegraph  sends  and  records  ticks,  while  the  phono- 
graph records  human,  vocal,  or  other  sounds  by  inden- 
tations on  a  wax  disk  or  cylinder.  What  right  would 
one  inventor  have  to  prevent  another  inventor  from 
making  the  former  inventor's  broad  invention?  He 
ought  to  be  satisfied  to  make  his  own  invention  and 
to  prevent  others  from  making  exactly  the  same 
invention. 

The  Patent  Office  will  make  each  inventor  restrict 
or  limit  his  claims  to  his  true  invention  or  improve- 
ment, in  this  case  recording  vocal  or  other  sounds.  But 
one  inventor  invented  the  telegraph  before  another 
inventor  invented  the  phonograph,  and  if  the  latter 
has  a  claim  in  his  patent  on  means  for  recording  sounds, 
the  Patent  Office  would  then  see  if  there  are  any  pre- 
vious patents  showing  any  means  for  recording  sounds 
in  any  manner.  If  there  are  no  previous  patents,  and 
the  thing  is  the  first  of  its  kind  ever  invented  or  in 
existence,  no  one  can  exclude  the  inventor  entitled 


Value  and  Price  of  Patents  7 

from  obtaining  his  broad  claim  on  any  means  for 
recording  sounds  in  any  manner. 

As  already  explained,  a  patent  simply  gives  one  a 
right  to  exclude  others.  This  is  the  only  right  it  con- 
fers. If  one's  patent  comes  ahead  of  or  was  issued 
before  another,  one  could  exclude  the  latter  patentee 
from  making  any  device  covered  by  one's  claim  and 
even  exclude  him  from  making  a  patented  improve- 
ment over  one's  own  device.  It  all  depends  upon  the 
wording  of  the  claim  and  how  the  claim  expresses  the 
structure  upon  which  one  has  obtained  a  monopoly. 
When  the  broad  patent  has  run  its  course,  it  is  open 
to  all. 

But  if  there  is  a  patent  ahead  of  one's  own  patent, 
one  may  find  oneself  unable  to  make  the  patented 
invention,  because  the  prior  patentee  may  have  a 
claim  giving  him  the  right  to  exclude  others  coming 
later.  Thus  one  will  readily  perceive  that  one  patent 
may  protect  an  invention  broadly,  giving  the  inventor 
a  monopoly  on  every  kind  of  machine  or  device  oper- 
ating to  perform  a  certain  function,  and  another  pa- 
tent may  protect  a  similar  invention  or  improvement 
specifically  so  that,  during  the  life  of  the  patent  having 
the  broad  claims,  the  owner  of  the  improvement  patent 
will  not  be  entitled  to  make  his  own  invention  because 
it  infringes  the  broad  claims  of  the  previous  patent. 
But  he  can  make  his  improvement  after  the  patent 
covering  the  broad  claim  expires,  because  then  this 
patent  will  become  public  property;  that  is,  any  one 
will  be  free  to  make  this  invention.  In  other  words, 
a  prior  patent  may  exclude  a  later  patentee  who  may 
exclude  a  still  later  patentee.  This  makes  the  last 
patentee  live  in  a  sort  of  glass  house! 


8  Sale  of  Inventions 

But  we  are  assuming  that  a  patent  contains  claims 
which  afford  adequate  protection  to  an  invention. 
Easy  to  say,  but  not  easy  to  do.  It  is  a  hard  thing 
to  express  or  define  in  words  the  exact  boundaries  of 
an  invention,  as  one  must  do  in  a  patent  claim.  Patent 
attorneys,  patent  lawyers  and  experts,  and  the  Patent 
Office  officials  realize,  at  times,  this  great  difficulty. 
Language  is  a  slippery  thing.  Then  again  it  is  the 
positive  duty  of  the  applicant  of  a  patent  or  of  his 
attorney  to  present  such  claims  as  the  applicant  desires 
to  protect.  The  Patent  Office  officials  merely  pass 
upon  these  claims.  It  is  a  strict  rule  of  patent  prac- 
tice that  what  an  inventor,  through  his  patent  attorney, 
does  not  claim  in  his  patent,  "  he  dedicates  to  the 
public,"  i.e.,  he  surrenders  to  the  public.  Therefore, 
if  an  attorney  neglects  to  file  claims  which  protect  an 
invention  broadly,  where  he  is  entitled  to  them,  the 
patent  will  issue  without  broad  claims  and  the  result 
will  be  many  infringements  of  the  device  and  much 
needless  competition.  Again,  one  may  unnecessarily 
limit  one's  claims  by  including  features  which  have 
nothing  to  do  with  the  real  invention,  but  which, 
according  to  strict  rules,  being  mentioned  in  the  claims 
of  the  patent,  the  law  will  and  must  assume  were 
considered  by  the  inventor  as  material.  (This  will  be 
explained  specifically  elsewhere.)  Therefore,  such 
claims  will  extend  a  direct  invitation  to  an  infringer 
to  omit  these  unnecessary  features  mentioned  in  the 
claim  and  so  escape  infringement  and  introduce  a 
ruinous  competition.  A  patent  which  thus  fails  to 
protect  is  a  bit  of  mere  waste  paper. 

It  is  not  the  writer's  intention  to  write  a  treatise 
on  patent  law,  but  enough  has  been  shown,  it  is 


Value  and  Price  of  Patents  g 

believed,  to  indicate  the  importance  of  every  inventor's 
engaging  the  services  of  a  patent  expert  to  prepare 
the  right  kind  of  claims  which  will  protect  every 
feature  of  an  invention.  It  is  the  wisest  and  safest 
course  for  the  inventor  to  pursue.  Any  reputable 
patent  attorney  is  ready,  upon  request,  to  investigate 
the  Patent  Office  records  to  see  if  there  are  any  prior 
patents  showing  features  embodied  in  an  invention 
before  one  applies  for  a  patent,  and  after  he  makes 
his  "  search,"  he  will  make  a  report  as  to  its  patent- 
ability. But  one  should  specifically  ask  the  patent 
attorney  to  inform  one  whether,  in  the  event  of  obtaining 
a  patent,  there  are  any  patents  standing  in  the  way  of 
constructing  one's  own  invention.  He  can  decide  this 
point,  and  if  there  happen  to  be  such  a  patent  and 
one's  invention  is  an  improvement  thereon,  one  should 
none  the  less  apply  for  a  patent  on  the  improvement, 
because  the  patent  would  exclude  the  previous  patentee 
from  making  one's  own  improvement  just  the  same  as 
his  patent  might  prevent  oneself  from  making  it.  If 
this  improvement  makes  his  article  better  and  there 
is  profit  enough  for  him  in  manufacturing  the  im- 
proved article,  he  will  be  glad  to  purchase  the  patent 
and  so  become  the  owner  of  the  two  patents. 

By  all  means  see  that  good  claims  are  allowed  before 
the  patent  issues,  because  it  would  be  too  late  to  grumble 
afterward.  One  will  never  regret  engaging  a  capable 
and  reliable  patent  attorney  or  lawyer. 

Obtaining  the  right  kind  of  patent  protection  — 
the  most  important  step  in  realizing  profits  from 
inventing  —  is  what  the  inventor  must  do  for  himself. 
He  cannot  ordinarily  rectify  any  failure  to  do  so  after 
the  patent  is  once  issued;  the  proper  time  to  act  is 


io  Sale  of  Inventions 

before  he  accepts  a  patent.  The  work  of  estimating 
and  finding  a  market  for  the  patented  article  may 
fall  upon  the  manufacturer  or  upon  the  financial 
backer,  upon  the  master  spirits  of  the  age,  but  first 
of  all  must  come  good  patent  protection.  It  is  up 
to  the  inventor  to  get  it.  The  manufacturer  expects 
him  to  get  it,  and  if  the  patent  offered  for  sale  contains 
no  good  or  strong  claims,  that  is  the  end  of  the  matter. 
Therefore,  be  careful  as  to  the  wording  of  patent 
claims.  Formulate  them  so  that  they  will  actually 
exclude  rivals  from  making  and  selling  the  invention. 
An  inventor  who  aspires  to  be,  some  day,  in  a  position 
to  receive  royalties  himself  from  succeeding  inventors 
must  be  exceedingly  careful  in  the  wording  of  the 
specifications  for  his  patent.  Purchasers  naturally 
look  to  obtain  broadly  covered  patents  and  take  the 
opinion  of  experts  as  to  the  scope  and  novelty  of  any 
patent  before  they  think  of  purchasing,  or  even  before 
setting  the  price,  since  the  actual  value  depends,  to 
a  large  extent,  on  the  scope  of  the  patent  claims. 
Purchasers  do  not  wish  to  expose  themselves  to 
lawsuits  by  leaning  on  broken  reeds. 

To  succeed  in  interesting  manufacturers  one  must  be 
able  to  furnish  information  on  the  scope  of  the  patent 
and,  most  important  of  all,  whether  in  mew  of  prior 
patents  the  invention  can  be  made  without  infringing 
them. 

It  is  hoped  the  reader  will  not  fail  to  realize  that  what 
an  inventor  has  to  sell  is  not  the  mechanical  construction, 
however  good,  but  the  patent  claims  which  protect  the 
article  or  process  of  manufacture;  also,  that  it  may  not 
even  be  possible  to  make  the  device  owing  to  prior  dom- 
inating patents,  causing  an  invention  to  become  an 


Value  and  Price  of  Patents  n 

infringing  device.  The  reader  should  know,  too,  that  only 
when  the  patent  well  and  truly  covers  all  the  patentdble 
novelty  that  there  is  in  an  invention,  will  the  full  value 
of  an  invention  be  secured  to  the  patentee  and  be  repre- 
sented by  the  patent.  But  just  in  proportion  as  the  in- 
vention is  deficiently  protected  or  features  of  novelty, 
omitted  or  not  fully  developed  in  the  statement  of  inven- 
tion, by  so  much  will  the  patent  be  reduced  in  value, 
until  in  such  lamentable  cases  where  the  patenting  has 
been  so  badly  done  that  the  patent  cannot  be  upheld  at 
all,  its  value  will  be  absolutely  nil. 

But  with  the  limitation  that  it  is  possible  for  a  good 
invention  to  sell  well  and  yet  earn  no  profits  because 
of  excessive  competition,  so  that  the  price  paid  for 
the  patent  will  be  small,  it  may  be  laid  down  as  a 
safe  rule  that,  once  assured  of  a  market,  the  success 
of  the  invention,  under  proper  management,  is  cer- 
tain. The  management  and  the  market  are  two 
factors  which  must  be  considered,  because  they  are 
interlinked  in  so  many  ways  that  one  without  the 
other  can  hardly  be  said  to  exist.  It  is  necessary  to 
deal  with  people  in  selling  inventions.  //  the  right 
kind  of  a  man  gets  hold  of  a  business,  it  succeeds.  If 
the  right  kind  of  business  firm  with  the  right  men  get 
hold  of  an  invention,  it  will  also  succeed. 

Every  patentable  idea  and  invention  must  pass 
through  six  cardinal  tests: 

1.  As  regards  patentability. 

2.  As  regards  mechanical  practicability. 

3.  As  regards  its  possession  of  superior  merit  and 

low  cost  of  production. 

4.  As  regards  a  large  and  constant  demand  for  it. 

5.  As   regards   being   better,    cheaper,    and   more 


12  Sale  of  Inventions 

salable  than  other  devices  already  on  the 
market. 

6.  As  regards  the  competition  it  will  encounter. 

These  factors,  when  carefully  analyzed,  dwindle 
down  to  a  consideration  of  the  article  and  the  market. 
It  is  the  policy  of  good  management  to  see  that  there 
is  a  good  market  for  a  good  article.  As  to  the  article, 
the  consideration  of  price  enters  because  of  the  cost 
of  producing  this  article.  As  to  the  market,  the  con- 
sideration of  price  enters  because  of  the  cost  of  intro- 
ducing this  article  into  the  market.  Good  management 
requires  that  an  article  be  manufactured  in  good  and 
acceptable  form,  but  as  this  is  true  whether  or  not 
the  article  is  patented,  it  is  necessary  simply  to  add, 
in  this  event,  that  good  management  sees  to  it  that 
the  patent  is  a  valuable  one  in  its  competition-shutting 
feature.  The  most  important  aspect  of  the  article, 
viewed  from  the  standpoint  of  cost  of  production,  is 
its  merit;  while  the  most  important  aspect  of  the 
article,  viewed  from  the  standpoint  of  introduction, 
is  the  demand.  This  brings  us  face  to  face  with  the 
question  of  merit  and  demand.  Three  features  will 
be  briefly  discussed  as  to  merits,  and  they  are  the 
following: 

1.  The  quality  of  the  article,  by  which  is  meant  the 

peculiar  advantages  the  article  possesses. 

2.  The  condition,  by  which  is  meant  the  appearance 

of  the  article,  the  state  of  completion,  effective- 
ness, and  durability,  in  point  of  construction 
and  use  of  the  same. 

3.  The  time  factor  of  the  article,  by  which  is  meant 

the  time  which  must  lapse  or  which  it  will 
take  before  an  article  will  bring  back  profits, 


Value  and  Price  of  Patents  13 

depending  on  its  nature  and  characteristics) 
development,  experiments,  etc. 

All  these  elements  enter  into  the  cost  of  production 
or  the  cost  of  manufacture.  When  this  end  is  well 
taken  care  of,  the  question  of  demand  steps  in  for 
primary  consideration.  The  controlling  feature  of 
demand  for  any  single  article  or  invention  is,  of  course, 
competition;  and  this  depends  as  much  upon  the  sup- 
ply of  the  article  as  upon  current  market  conditions. 
The  entire  question,  although  naturally  complex, 
will  be  simplified  by  an  example. 

If  one  has  an  article  which  can  retail  for  five  or 
ten  cents  —  simple  in  construction  and  inexpensive 
to  produce  —  and  can  get  the  five  and  ten-cent  stores 
to  sell  it,  one  will  find  this  often  the  easiest  road  to 
success.  Take  the  Woolworth  chain  of  stores  for 
example.  The  method  of  taking  up  an  article  of  this 
nature  with  this  concern  is  as  follows:  The  inventor 
will  take  the  article  to  the  manager  of  any  branch 
store,  explain  its  merits,  and  satisfy  him  it  can  be 
sold  for  this  price.  (Question  of  cost  of  manufacture, 
quality,  condition,  and  time.)  Never  mind  about 
actually  manufacturing  it  for  him.  The  manager, 
if  he  thinks  it  worth  while,  will  send  the  article  to 
the  general  purchasing  agent,  who  has  his  office  in  the 
Woolworth  Building  in  New  York  City,  where  the 
main  office  of  the  concern  is  located.  The  purchasing 
agent,  in  turn,  will  investigate  the  article  and  its 
marketing  conditions  —  process  of  manufacture,  prob- 
able demand,  consumption,  repeat  orders  —  and  reach 
a  decision  as  to  whether  it  pays  to  handle  it  at  all. 
This  is  the  crucial  point;  because  once  he  decides  that 
it  does  pay  to  handle  it  and  he  takes  it  up,  there  is 


14  Sale  of  Inventions 

laid  before  the  inventor  as  an  outlet  and  market  for 
the  article,  one  of  the  largest  selling  organizations  in 
the  world,  reaching  millions  of  purchasers,  an  organiza- 
tion, too,  that  has  a  small  selling  expense.  This  is 
the  reason  why  it  usually  pays  to  invent  an  article 
like  a  pin  and  other  similar  money-making  inventions. 

Of  course  it  does  not  necessarily  follow  that,  in  order 
to  be  good  and  meritorious  and  sell  fast,  an  article  must 
be  simple.  But  its  simplicity  over  rival  articles  is  a 
matter  of  so  great  importance  that  it  cannot  be  emphasized 
too  strongly  here.  In  other  words,  the  condition  of  an 
artick,  as  explained  above,  is  most  vital.  To  place 
an  article  of  quality  in  condition,  takes  time.  All  the 
really  important  things  have  taken  time  and  patience 
to  bring  to  perfection.  Thus  most  any  inventor  who 
finds  himself  making  quick  profits  may  be  sure  that 
they  will  be  short-lived,  although  this  may  be  a  good 
thing  while  it  lasts.  Confidence,  tenacity  of  purpose, 
and  capital  are  the  requisites  for  building  up  big 
fortunes  or  the  foundation  of  a  patent,  but  the  thing 
itself  must  have  intrinsic  merit.  The  simplest  in- 
ventions are  the  best  money-making  devices  for  no 
other  reason  than  that  it  takes  less  capital  to  put 
them  on  a  successful  profit-producing  basis. 

The  real  value  of  a  patent  is  the  net  value  of  the  monop- 
oly over  ordinary  trading  profits,  and  when  followed  by 
estimation  on  likely  instances  of  uses  during  the  time 
of  monopoly  (seventeen  years)  and  deduction  of  cost 
of  introduction  and  of  maintenance  of  patents,  will 
give  the  estimated  return  from  the  patent  during  the 
term  of  the  grant. 

The  value  of  use  is  the  advantage  possessed  by  the 
invention  over  previously  existing  devices,  methods, 


Value  and  Price  of  Patents  15 

and  machines  in  use  with  the  same  object.  It  is 
capable  of  exact  calculation  and  expression  in  terms 
of  value.  Thus  whether  a  machine  or  process,  the 
advantage  may  be  in  the  decrease  of  initial  cost  of 
construction  or  of  installation,  decrease  of  working 
expenses,  improved  number  or  quality  of  vendible  or 
usable  product  —  any  or  all  of  these.  The  advantage 
in  each  case  may  be  expressed  as  so  much  monetary 
saving. 

Instances  of  Use.  —  To  determine  the  extent  of 
the  probable  employment  of  the  invention,  statistics 
will  be  necessary  from  which  may  be  learned  the 
volume  of  trade  in  or  from  similar  articles  or  methods 
which  the  invention  is  designed  to  supersede.  If  the 
invention  is  for  use  in  production,  an  estimate  should 
be  made  of  the  number  of  producers  likely  to  be  in- 
fluenced to  abandon  the  old  for  the  new  process  — 
perhaps  more  or  less  dependent  upon  the  amount  of 
profit  in  favor  of  the  new  invention,  and  the  per- 
suasiveness of  the  introducer. 

The  Present  Value.  —  The  present  value  of  seven- 
teen years'  equal  profits,  say  at  ten  per  cent,  is  about 
twelve  and  one  half  times  one  year's  profits.  Ten 
per  cent  must,  however,  be  considered  as  a  somewhat 
small  return  for  such  a  speculative  investment;  and 
moreover,  it  is  frequently  found  that  the  profits  are 
less  in  the  beginning  than  at  the  end  of  the  term  of 
patents.  Probably  four  or  five  years'  purchase  would 
be  a  fair  amount  in  average  cases;  but  still  the  amount 
must  vary  inversely  with  the  probability  of  further 
improvements  arising  to  oust  the  invention  from 
commercially  profitable  use. 

Know  the  exact  costs  of  selling  the  patented  article. 


16  Sale  of  Inventions 

While  it  never  is  practicable  to  determine  this  until 
an  article  is  actually  manufactured,  every  effort 
should  be  made  to  secure  as  accurate  an  estimate  as 
possible  during  its  preparatory  consideration.  The 
smaller  the  selling  price  and  the  more  liable  the  article 
to  meet  competition,  the  greater  the  care  necessary 
in  making  the  estimate.  Tabulations  of  every  part 
and  its  cost  should  be  made  either  by  the  inventor 
or  by  a  competent  person  selected  by  him. 

Inventors  fail  to  attain  success  by  omitting  to 
balance  the  cost  and  profit.  Some  design  articles  of 
manufacture  only  to  find  that  the  cost  of  manufactur- 
ing them  is  greater  than  the  cost  of  manufacturing 
other  articles  of  a  like  character.  Many  have  con- 
sidered things  to  be  advantages  which  have  not  proved 
so  in  practice.  One  should  not  be  misled.  It  is  far 
easier  to  estimate  the  value  of  licenses  than  the  out- 
right value  of  patents.  Sometimes  the  use  of  a  ma- 
chine of  a  particular  size  will  govern  the  amount  of 
license  to  be  charged.  For  example,  one  could  sell 
an  invention  in  the  manufacture  of  steam  turbines  of 
less  than  a  thousand  kilowatts  to  one  man  at  one  price 
and  a  license  to  manufacture  steam  turbines  of  over  a 
thousand  kilowatts  to  another  man  at  another  price. 

A  good  way  of  estimating  the  value  of  a  patent, 
without  actually  proceeding  to  manufacture  the  article, 
is  to  get  a  first-class  model-maker  to  construct  it. 
To  get  the  right  price  of  a  patented  article,  send  the 
article  to  users  with  requests  for  their  opinion  after 
a  few  weeks'  use.  If  the  reports  are  favorable,  the 
price  should  be  figured  out  on  a  regular  manufacturing 
scale  with  all  labor,  material,  and  expenses  of  manage- 
ment included.  In  this  calculation  it  is  best  to  make 


Value  and  Price  of  Patents  17 

the  price  on  the  basis  of  contracting  the  work  out, 
and  applications  for  estimates  for  furnishing  the  article 
should  be  made  to  firms  equipped  for  the  manufacture 
of  this  kind  under  contract.  If  the  estimate  of  cost 
thus  obtained  exceeds  that  which  it  is  ascertained  can 
be  got  from  the  wholesale  jobbers,  then  either  the  in- 
vention must  be  altered  or  abandoned.  If  altered, 
it  must  be  capable  of  manufacture  at  a  lower  price. 
In  most  cases  this  simple  matter  of  addition  and 
subtraction  with  a  small  ingredient  of  exertion  has 
not  been  gone  through  at  all,  and  the  inventor  merely 
proceeds  upon  theory  rather  than  upon  facts  which 
he  can  easily  ascertain  in  advance.  Those  not  familiar 
with  the  cost  of  construction  in  manufacturing,  little 
realize  how  important  it  is  to  save  cost  in  small  details. 
The  reason  is  that  the  intense  competition  of  the 
open  market  leaves  at  best  but  a  narrow  margin  for 
profits  with  most  articles,  and  large  profits  are  made 
by  the  use  of  cheap  processes  of  production  and  large 
quantities  of  articles  sold. 

It  should  be  borne  in  mind  that  a  first-class  model- 
maker  will  not  set  a  fixed  price  on  any  work  he  may 
undertake  in  the  nature  of  constructing  a  full-sized 
or  working  model  for  any  inventor.  He  will  inform 
the  inventor  that  considerable  experimentation  may 
be  necessary  in  preparing  the  article  in  an  acceptable 
condition  in  order  that  its  entry  into  the  market 
may  be  consistent  with  the  earning  of  immediate 
profits.  Furthermore,  a  high  degree  of  merit  should 
be  attained  in  this  trial  for  the  public  approval.  After 
a  model  has  been  finished,  embodying  the  best  methods 
of  construction  known  to  the  model-maker,  things 
will  be  in  a  condition  for  estimating  the  price  of  the 


18  Sale  of  Inventions 

article,  and  a  suitable  basis  for  a  royalty  arrived  at. 
The  model-maker  will  base  the  cost  of  making  a  sat- 
isfactory article  on  the  material,  size,  and  make-up 
of  the  invention,  and  on  the  amount  of  machinery 
employed  and  skilled  labor  used  in  its  elaboration. 
However,  the  consumer  practically  controls  the  price 
at  which  a  patented  article  must  sell  and  incidentally 
the  price  of  the  patent  itself. 

If  an  inventor,  having  control  of  his  monopoly, 
overestimates  the  worth  and  importance  of  his  in- 
vention and  sets  his  trade  price  too  high,  it  means 
that  he  restricts  his  volume  of  sales  and  volume  of 
manufacturing  production.  He  will  therefore  be  care- 
ful to  fix  his  price  at  a  point  where  he  expects  the 
natural  law  to  bring  him  great  returns  on  his  inven- 
tion, but  he  is  also  concerned  with  the  price  at  which 
his  invention  reaches  the  public  that  it  may  include 
a  sufficient  profit  to  repay  the  dealer  for  the  invest- 
ment and  effort  he  must  put  forth  in  selling. 

In  another  chapter  the  factors  determining  the 
cost  and  selling  price  of  patented  inventions  will  be 
fully  discussed.  Thus  in  the  present  chapter  it  suffices 
to  consider  the  question  of  price  only  where  the  con- 
trolling or  deciding  factor  is  competition  based  upon 
a  patentable  monopoly. 

Remember  that  cost  is  always  a  relative  term, 
never  absolute.  The  cost  of  making  the  same  article, 
in  different  factories,  is  always  different  owing  to  the 
difference  in  "  factory-overhead "  expense,  cost  of 
labor,  and  selling  expense. 

The  price  to  be  paid  for  acquiring  a  patent  thus 
depends  upon  the  distinct  advantage  the  manufacturer 
will  obtain  in  exploiting  it.  Chief  among  the  inci- 


' 


Value  and  Price  of  Patents  19 

dental  or  indirect  advantages  is  the  fact  that  price- 
fixing  generally  becomes  important  in  the  case,  of 
patented  articles.  It  is  proposed  here  merely  to 
hint  at  this  consideration,  as  the  topic  will  be  dis- 
cussed elsewhere.  Then  again  the  very  fact  that 
prices  are  fixed  is  a  guaranty  that  they  are  not  fixed 
too  high  in  the  long  run.  Suppose  the  maker  of  a 
patented  article  does  place  an  unreasonable  price  upon 
his  product,  what  results?  Since  no  one  is  compelled 
to  buy  except  by  choice,  the  article  does  not  sell.  If 
it  does,  it  is  worth  the  price  in  the  eyes  of  the  buyers 
in  exchange  for  the  improved  service  it  renders;  and 
if  an  article  does  sell  in  satisfactory  volume  at  any 
good  and  fixed  price,  it  is  proof  that  the  invention  has 
made  a  contribution  to  society  more  than  equivalent 
to  the  returns  expected. 

The  estimated  commercial  value  of  an  invention  is 
the  value  of  the  superior  efficacy  of  the  invention 
over  the  best  of  its  competitors  in  each  instance  of 
its  employment,  multiplied  by  the  number  of  instances 
of  its  employment  or  likely  employment  and  by  the 
time  during  which  it  is  likely  to  have  preeminence. 
It  is  impossible  to  calculate  beforehand  the  absolute 
commercial  value  of  any  invention,  because,  although 
its  value  over  competitors  may  be  stated  with  exactness, 
the  number  of  instances  of  its  employment ,  rate  of  output 
of  product,  and  its  duration  of  use  can  hardly  be  deter- 
mined and  must  be  conjectured  more  or  less  accurately 
according  to  the  practical  experience  of  the  calculator. 

In  closing  this  chapter,  it  will  be  necessary  to  dis- 
cuss the  depreciation  of  patents  in  point  of  value. 
At  present  this  subject  is  more  or  less  shrouded  in 
mystery  to  many,  but  as  a  rule  the  depreciation  of 


20  Sale  of  Inventions 

patent  values  occurs  most  rapidly  the  first  years  of 
their  existence,  during  which  years  the  greatest  profit 
is  derived  from  their  application  or  use.  This  fact 
should  always  be  borne  in  mind. 

A  great  number  of  patents  are  of  little  value  after 
the  tenth  year,  and  most  manufacturers  take  this 
condition  into  consideration. 

A  patent  remains  an  asset  as  long  as  it  has  not 
become  obsolete.  In  fact,  it  is  much  easier  to  estab- 
lish the  real  value  of  patents  than  the  theoretical  value 
of  good-will.  While  it  is  not  easy  to  anticipate  and 
forejudge  the  productive  life  of  a  patent,  the  best  way 
is  to  maintain  a  reserve  fund  to  take  care  of  patent 
depreciation,  in  the  same  manner  as  reserves  are 
maintained  for  plants,  buildings,  machinery,  etc.  In 
this  way,  during  the  legal  life  of  the  patent  the  pur- 
chase price  is  always  borne  before  the  observer;  but  the 
amount  added  continuously  to  the  reserve  fund  will  or 
should  more  than  equal  the  purchase  price  of  the  patent. 

A  few  years  ago  a  manufacturer  of  automobile 
engines  purchased  a  patent  at  a  cost  of  fifty  thousand 
dollars.  He  estimated  the  useful  life  of  this  patent 
to  cover  a  period  of  not  more  than  four  years,  due 
to  the  rapid  development  of  this  class  of  engine.  He 
finally  decided  to  write  down  the  value  of  this  patent 
on  a  royalty  basis,  and  add  it  to  the  cost  of  produc- 
tion at  the  rate  of  one  dollar  for  each  machine.  At 
the  end  of  eighteen  months  the  original  cost  of  the 
patent  had  been  absorbed  in  the  production  cost 
without  reducing  his  net  profit  over  that  of  former 
periods.  This  patent  had  not  as  yet  become  ob- 
solete, but  he  adopted  a  sound  policy,  to  which  the 
condition  of  his  business  will  testify. 


CHAPTER  H 

GAUGING   TEE  MERITS  OF  AN 
INVENTION 

THE  spirit  of  the  times  demands  merit  in  an  in- 
vention, and  financial  remuneration  for  the 
inventor  requires  it.  The  whole  tendency  of 
the  present  industrial  age,  the  manufacturing  spirit 
and  competition,  which  is  most  strenuous  even  in 
industries  which  rely  upon  and  work  under  patents, 
forces  the  use  of  the  best  instead  of  any  inferior  de- 
vices. It  is  human  nature  to  take  advantage  of  a 
trade  —  if  the  seller  does  not  know  values  —  and 
also  to  break  off  negotiations  if  he  is  asking  an  ex- 
orbitant price.  This  is  true  as  long  as  the  value  of 
the  article  is  unascertained.  If  the  inventor  does 
not  know  what  he  has  to  sell,  he  cannot  expect  others 
to  go  to  the  trouble  and  expense  of  finding  out. 

It  is  capital  the  inventor  wants  all  the  time,  but 
merit  must  come  first.  The  simplest  way  to  test 
the  merits  of  any  invention  is  to  find  out  first  if  it 
has  intrinsic  value  and  then,  if  so,  whether  it  is  an 
overnight  affair  to  recognize  this  value  or  a  prolonged 
matter  based  upon  comparisons  made  with  similar 
articles. 

Eliminate  all  sentimental  feeling  in  connection  with 
any  invention.  Be  its  own  worst  critic.  One  should 
adjust  one's  viewpoint  toward  it  so  that  instead  of 
its  becoming  a  part  of  oneself,  as  so  often  happens, 

21 


22  Sale  of  Inventions 

one  can,  figuratively,  criticize  it  through  the  eyes 
of  one's  unfriendliest  acquaintance.  The  inexperienced 
inventor  will  at  times  cover  up  a  known  defect,  refuse 
to  admit  it  even  to  himself,  in  the  hope  that  no  one 
else  will  discover  it.  This  line  of  reasoning  must  be 
gotten  out  of  one's  mind  instantly.  Every  invention 
has  or  will  develop  a  competitor.  He  will  find  the 
defect.  What  is  the  use  of  deceiving  oneself  when  to 
do  so  results  to  one's  own  misfortune? 

Some  inventions  drag  along  for  years  without 
getting  to  a  paying  stage  and  then  suddenly  make 
fortunes  for  their  owners  when  the  patent  is  almost 
run  out.  The  typewriter  is  a  practical  example. 
Some  of  the  most  promising  inventions  are  those 
which  cannot  be  realized  upon  immediately.  They 
are  in  advance  of  their  age.  It  is  well  known  that 
there  is  very  little  money  now  in  surface  washing  or 
placer  mining  for  gold  and  that  all  the  big  profits  are 
made  out  of  long  and  patient  development  of  deep 
mines.  The  same  is  true  of  patents.  The  patented 
devices  which  sell  like  pancakes  are  only  surface 
washings;  they  are  not  all  up  to  the  mark  either. 

It  is  capital  all  the  time  with  the  inventor.  Merit 
will  win  capital  to  be  sure,  but  initially  and  primarily, 
capital  will  breed  merit  in  any  article  and  will  infuse 
new  blood  intodts  sale.  In  patented  articles  the  labor 
element  is  most  important.  To  assure  success,  the 
inventor  must  commence  right.  He  must  pursue 
his  invention  like  any  business,  but  only  more  steadily, 
because  he  must  strike  out  with  something  new.  It 
has  been  aptly  remarked  "  that  the  great  secret  of 
success  in  life  is  for  a  man  to  be  ready  when  his  op- 
portunity comes,"  and  this  applies  with  great  force 


Gauging  tJie  Merits  of  an  Invention          23 

to  a  patentee.  But  "a  wise  man  will  make  more  op- 
portunities than  he  finds."  A  patentee  is  the  sole 
proprietor  of  valuable  property.  His  position  is 
similar  to  a  man  possessing  a  rough  diamond  needing 
polishing.  It  takes  machinery  to  make  a  machine  — 
a  shop,  workmen,  and  materials.  And  these  cost 
money.  As  explained  before,  one  cannot  tell  whether 
an  invention  is  really  valuable  until  it  is  made  in  a 
shop  and  finished.  It  is  an  almost  unheard  thing 
for  an  inventor  to  succeed  single-handed.  He  must 
have  the  necessary  capital. 

An  article  must  have  some  merit  to  win  out,  unless 
it  is  a  nine  days'  wonder  merely.  An  army  of  experts 
cannot  make  a  success  of  a  poor  scheme.  Perhaps 
the  work  of  every  inventor  will  not  turn  out  meri- 
torious, but  for  the  sake  of  finding  one  genius  we  can 
well  afford  to  tolerate  a  multitude  of  ungifted  in- 
ventors, as  no  one  knows  whence  the  gifted  inventor 
may  come.  As  to  degrees  of  merit,  it  is  not  always 
mechanical  superiority  which  counts.  An  inventor 
often  assumes  as  a  sort  of  rough  guess  that  an  article 
with  slight  superiority  will  secure  a  hundred  per  cent 
of  the  total  consumption,  while  as  a  matter  of  plain 
everyday  fact,  a  satisfactory  article  with  good  distri- 
bution and  management  is  often  a  far  more  attrac- 
tive asset  than  a  superior  article  without  accom- 
panying financial  aid  and  knowledge  of  merchandizing. 
Again,  what  counts  is  business  that  can  be  held  at  a 
reasonable  sales  expense  when  once  secured. 

The  merit  of  any  article  newly  created  is  seldom 
determined  by  one  man.  The  inventor  should,  there- 
fore, seek  the  opinions  of  those  qualified  to  pass  upon 
the  merits  of  his  invention.  It  is  necessary  to  know 


24  Sale  of  Inventions 

who  are  and  who  are  not  thus  qualified.  Who  could 
forecast  the  immense  commercial  advantages  of  the 
telephone  and  other  epoch-making  inventions?  It 
frequently  happens  that  an  exceedingly  important 
invention  and  one  which  can  be  fully  protected  under 
the  patent  law  differs  so  little  in  its  general  appear- 
ance from  the  drawings  of  prior  patents,  that  an 
unpracticed  eye  is  unable  to  detect  an  important 
distinction. 

The  best  way  of  finding  out  the  possible  value  and 
merit  of  an  invention  is  by  consulting  people  right 
in  one's  home  town.  If  they  think  the  article  is  good, 
one  can  use  them  in  connection  with  one's  plans  to 
raise  capital  later  on.  If  the  device  is  a  railroad  ap- 
pliance, consult  the  men  in  the  repair  shops  in  the 
vicinity  as  to  its  merits,  as  they  are  good  judges.  Do 
not  sink  money  without  an  investigation.  The  local 
hardware  man  is  a  good  judge  of  the  usefulness  of  any 
ordinary  tool.  Practical  people,  living  all  around 
you,  can  and  will  give  excellent  advice.  Go  to  the  man 
at  the  top,  the  successful  man.  One  can  stand  criti- 
cism of  one's  invention,  and  if  after  hearing  it,  one's 
confidence  is  unshaken,  there's  every  chance  to  win. 
If  one's  idea  is  any  good  at  all,  it  will  come  through 
this  trial  of  criticism.  The  heads  of  every  line  of 
industry  know  everything  vital  about  their  arts; 
anything  moderately  good  that  suggests  bigger  profits 
is  what  they  want;  and  when  they  find  what  they 
want,  they  have  financial  friends  who  have  confidence 
in  their  judgment. 

By  all  means,  let  the  model  itself  speak  in  favor  of 
merit,  otherwise  it  may  be  too  late  to  induce  action 
on  the  part  of  manufacturers;  but  consider  carefully 


Gauging  the  Merits  of  an  Invention          25 

to  whom  to  show  this  model  for  an  opinion  of  its 
merit. 

Marketing  an  invention  depends  upon  the  situation 
of  the  inventor  himself  with  respect  to  parties  inter- 
ested. It  depends  upon  his  business  environment,  his 
business  acquaintance  and  standing  in  the  business 
world.  In  many  cases  a  mere  idea  in  itself  is  not 
attractive  to  the  investing  public.  In  most  cases  it 
is  necessary  to  have  a  model  made.  This  model,  if 
made,  should  perform  its  work  without  a  hitch.  How- 
ever, capitalists  and  investors  —  as  distinguished  from 
the  manufacturers  —  are  not  as  a  rule  mechanics  and 
are  not  concerned  with  the  inward  working  and  com- 
bination of  parts  of  the  machine.  What  they  want  is 
results.  Hence  it  is  necessary  to  bring  the  invention 
to  a  state  of  practical  perfection  before  an  attempt  is 
made  to  enlist  capital.  Of  course,  in  showing  one's 
ideas  to  men  conversant  with  such  devices,  the  patent 
may  suffice.  For  example,  if  the  invention  is  a  tool, 
send  the  same  to  some  large  hardware  dealers  with  the 
request  for  an  opinion  whether  they  could  sell  the  article 
and  at  what  price  in  wholesale  lots.  A  few  samples 
might  also  be  distributed  among  practical  machinists. 

It  is  axiomatic  that  the  simplest  inventions  are 
the  best  money-makers. 

The  collar  button  that  turns  down  at  the  back 
produced  a  big  fortune. 

Harvey  Kennedy  introduced  the  shoe  lace  and 
made  $2,500,000. 

The    ordinary    umbrella    benefited    six    people    by 

$10,000,000. 

The  Howard  patent  for  boiling  sugar  proved  a 
lucrative  investment. 


26  Sale  of  Inventions 

Sir  Josiah  Mason,  who  invented  the  improved  steel 
pen,  made  a  large  fortune. 

The  inventor  of  the  shading  pen  had  a  yearly  in- 
come of  $200,000. 

The  wooden  ball  with  an  elastic  attachment  yielded 
over  $50,000  per  year. 

The  lady  who  invented  the  baby  carriage  realized 
over  $50,000. 

A  young  man  of  twenty-seven  invented  the  veneer 
put  upon  shoe  pegs  to  keep  them  from  splintering 
and  received  $200,000.  The  man  who  discovered 
that  a  newspaper  wrapper  could  be  gummed  and 
applied  this  knowledge  in  a  practical  way  by  patent- 
ing the  process,  made  a  fortune  large  enough  to  enable 
him  to  found  two  schools  for  boys.  Tom  O'Toole, 
the  miner  who  couldn't  keep  the  pocket  flap  of  his 
trousers  buttoned  in  the  usual  way  when  filled  with 
the  tools  of  his  trade  substituted  metal  eyelets  and 
hooks  for  buttons,  and  that  little  invention  made  him 
independent  for  life.  Canneld  became  rich  when  he 
devised  a  seamless  shield  for  women's  dresses.  Den- 
nison  gained  a  big  fortune  for  his  idea  of  a  shipping 
tag  with  an  eyelet  reinforcement.  The  everyday 
can-opener  is  a  little  invention  that  is  profitable.  The 
DeLong  hook  and  eye  was  a  clincher  from  the  very 
start.  A  thumb  latch  brought  wealth  to  two  New 
Haven  men,  Philos  Eli  and  John  A.  Blake.  The 
automatic  inkstand  was  worth  $200,000  to  its  origi- 
nator. Joseph  F.  Glidden,  who  invented  the  barbed 
wire  fence,  made  a  million  in  royalties.  A  flying  top 
of  tin  with  wings  which  flew  up  in  the  air  earned  a 
good-sized  fortune.  "  Pharoah's  serpents,"  an  odd 
sort  of  firework,  put  $50,000  into  the  pocket  of  the 


Gauging  the  Merits  of  an  Invention         27 

originator.  And  more  recently,  Dr.  L.  F.  Adt  of 
Albany,  N.  Y.,  the  inventor  of  the  Shur-on  eyeglass, 
realized  big  gains  therefrom.  A  humble  workingman 
who  devised  a  stylographic  pen  that  .would  shade  in 
different  colors  got  $100,000  within  a  year  from  his 
invention.  Yet  these  inventors  were  not  professional 
inventors.  Some  merely  stumble  upon  their  ideas, 
and  their  devices  prove  "  masked  batteries"  as  it 
were.  The  remuneration  to  the  inventor  of  a  simple 
meritorious  invention  is  not  always  by  way  of  a  direct 
purchase.  Thus  an  inventor  in  the  employ  of  the 
Bissell  Carpet  Sweeper  Company  of  Grand  Rapids, 
Michigan,  was  paid  a  salary  of  $5000  a  year  and  a 
commission  on  every  dozen  sweepers  sold  for  a  great 
many  years.  He  was  taken  from  incompetence, 
died  a  wealthy  man,  and  his  family  today  are  well 
provided  for. 

The  inventor  should  understand  the  relation  be- 
tween value  and  merit  of  an  invention.  Value,  while 
based  upon  merit,  is  conditioned  upon  personal  ini- 
tiative. Get  the  right  perspective.  This  applies 
both  to  the  inventor  and  exploiter.  The  one  is  prone 
to  be  too  enthusiastic  and  the  other  too  conservative; 
but  when  both  yield  a  little,  it  will  mean  attaining 
a  fair  estimate  of  an  invention.  Inventors  are  not 
all  cranks,  as  the  joke  pages  of  the  periodicals  would 
have  one  infer.  True,  they  are  enthusiastic  and 
properly  so,  for  had  they  not  been,  many  of  the  greatest 
inventions  of  the  age  never  would  have  gone  beyond 
the  experimental  stage.  It  is  for  the  buyer  of  inven- 
tions to  temper  this  enthusiasm  with  that  amount  of 
conservatism  which  will  "  bring  him  back  to  earth,"  but 
not  to  the  point  of  belittling  the  invention  if  it  is  a 


28  Sale  of  Inventions 

good  one.  No  inventor  with  a  good  patent  will  per- 
mit it.  He  is  liable  to  take  it  elsewhere  to  the  dis- 
comfiture of  those  interested  if  this  method  is  being 
pursued  to  "  beat  him  down  "  in  price. 

The  difference  between  a  staple  article  and  the 
patented  improvement  on  that  article  is  usually  ex- 
pressed in  terms  of  merit.  It  will  usually  take  less 
time  and  effort  to  push  the  article  of  merit.  That  is 
why  an  article  with  the  least  merit  will  always  pay 
the  greatest  amount  of  commission.  The  manu- 
facturer who  markets  an  article  that  has  genuine 
quality  cannot  afford  to  pay  large  commissions. 

This  superiority  of  a  patented  article  over  a  mere 
staple  is  a  good  presumption  and  arises  from  the 
fact  that  an  inventor  must  get  a  point  of  advantage 
over  the  whole  world,  because  if  the  patented  article 
has  been  used  before  and  has  become  known  to  the 
public  by  prior  publication  or  by  public  use  in  this 
country,  the  patent  is  void. 

The  inventor  who  blends  in  himself  the  dual  char- 
acter of  an  originator  as  well  as  capitalist  is  on  the 
nearest  road  toward  success.  He  does  not  worry 
about  getting  started  right  or  raising  capital.  The 
patentee  addresses  himself  to  the  public  from  whom 
he  expects  support.  But  is  it  always  necessary? 
Sometimes  the  failure  of  an  inventor  to  realize  on  his 
invention  is  due  to  the  lack  of  thrift.  There  seems  to 
be  implanted  in  the  breast  of  all  great  inventors  an 
indomitable  spirit  which  generally  enables  them  to 
overcome  all  difficulties.  The  inventor  who  does 
not  feel  that  he  possesses  this  invincible  self-will 
must  endeavor  to  acquire  it.  There  is  no  particular 
secret  of  success  in  inventing  any  more  than  there  is 


Gauging  the  Merits  of  an  Invention         29 

in  anything  else;  the  tradesman  who  spends  less 
than  he  earns,  may  in  the  course  of  time  become  a 
capitalist.  The  foreman  may,  after  the  lapse  of 
years,  come  to  be  a  master,  etc.  Almost  all  of  the 
great  business  enterprises  owe  their  origin  and  their 
continued  prosperity  to  the  fact  that  their  founders 
were  patentees. 

In  the  nature  of  patented  things  it  will  often  be 
found  that  things  which  are  useless  in  one  way 
become  useful  in  another  way.  A  device  may  be 
without  value  in  one  art  but  of  immense  value  in  a 
different  art;  e.g.,  a  nonrefillable  bottle  may  not  be 
practical,  but  it  may  contain  the  germ  of  a  good  in- 
vention of  a  check  valve. 

It  is  necessary  to  know  how  to  take  advantage  of 
the  merit  inhering  in  any  article  or  thing.  There  is 
only  one  way  of  going  at  it  successfully  and  that  is 
by  thoughtful  work.  If  one  is  the  inventor  of  an 
article  he  should  forge  ahead  and  find  out  how  to  get 
the  right  talking  points,  as  it  is  a  fact  that  patents, 
copyrights,  and  trade  marks  often  furnish  the  ground- 
work for  a  great  number  of  telling  arguments.  An 
electric  machine  may  be  the  basis  of  a  hundred  or 
more  controlling  patents.  The  machine  may  be 
"  talked  up,"  along  the  lines  that  these  patents  not 
only  protect  but  shut  out  any  competitor  from  making 
any  machine  approximately  as  good,  etc.  If  one  is 
commercially  inclined  and  wants  to  become  a  cap- 
italist, he  should  begin  by  marketing  an  article  of 
merit.  Remember  that  the"  brightest  minds  in  the 
business  world  are  endeavoring  to  solve  the  problem 
of  how  best  to  market  an  article.  To  start  with 
little  or  no  money,  build  up  a  business,  equip  the 


30  Sale  of  Inventions 

plant,  buy  raw  materials,  hire  help,  manage  a  factory, 
establish  credit,  advertise,  fill  orders,  collect  accounts, 
and  do  the  thousand  and  one  other  things  necessary 
to  make  a  success  of  a  business  requires  a  good  virile 
mind,  plenty  of  hard  work  and  close  attention  to 
details,  and  should  be  a  steady,  gradual  development. 
Let  every  inventor  adopt  the  motto,  "  This  one  thing 
I  do." 

If  one  is  mechanically  inclined  and  wants  to  become  a 
capitalist,  let  him  take  hold  of  a  meritorious  article 
and  seek  to  improve  it,  thus  becoming  an  inventor 
himself.  It  is  simply  necessary  to  know  what  articles 
on  the  market  succeed  because  of  merit.  It  is  inter- 
esting to  know  that  about  four  hundred  patents  were 
taken  out  of  the  patent  office  on  safety  razors  since 
Mr.  Gillett's  invention.  The  owners  wanted  a  part 
of  his  success.  The  Gillett  Company  spent  four 
million  dollars  in  advertising  their  article  and  edu- 
cating the  public  to  its  use. 


CHAPTER  HI 

TYPES  OF  INVENTIONS  (THE  COM- 
MERCIAL SIDE) 

INVENTIONS  are  not  all  of  the  same  character. 
There  are  various  types  of  them.  We  are  con- 
cerned only  with  those  types  which  will  spell 
success  from  a  financial  standpoint.  But  regard- 
less of  the  type  of  any  particular  invention,  what 
counts  is  the  amount  of  personal  initiative  of  the 
originator.  A  test  of  a  patent  is  its  practical  ap- 
plication. The  reputation  of  an  inventor,  unlike 
that  of  an  artist  or  a  writer,  counts  for  nothing.  Every 
new  invention  made  by  him  must  have  commercial 
value  and  must  be  successful.  It  may  make  the 
financing  of  a  second  invention  easy,  but  it  will  not 
sell  it.  Each  invention  must  stand  or  fall  on  its  own 
merits.  People  will  not  make  a  stir  about  inventions 
which  have  no  merit. 

There  are  simple  types  and  complicated  types  of 
successful  inventions.  An  invention  belongs  to  the 
simple  type  when  its  construction  embraces  a  mini- 
mum of  parts  and  when  at  the  same  time  its  pushing 
calls  for  no  extraordinary  expedients.  As  an  example 
of  a  simple  invention,  take  the  bottle  cap.  Every 
time  anybody  in  the  United  States  pulls  off  the  cap  of 
a  beer  bottle  or  soda  water  bottle  to  quench  his  thirst, 
he  pays  a  fraction  of  a  cent  into  the  pocket  of  one 
William  H.  Painter  of  Baltimore.  This  gentleman, 

31 


32  Sale  of  Inventions 

however,  carried  his  patent  in  the  pocket  for  six  years 
before  interesting  capital.  Finally  he  succeeded  and 
today  he  is  a  millionaire  many  times  over. 

This  is  an  ideal  example  of  a  simple  invention,  be- 
cause it  illustrates  the  great  truth  that  to  go  out  of 
the  beaten  track  and  make  an  invention  pay,  one 
must  have  an  article  of  merit  which  must  run  the 
gauntlet  of  repeated  rejection  until  the  day  of  final 
triumph.  The  complicated  invention,  however,  on 
the  other  hand,  not  only  is  more  unsparing  of  parts, 
but  the  effort,  labor,  and  time  expended  to  push  it 
may  be  tedious.  Look  at  any  complicated  piece  of 
mechanism.  Invariably  you  will  find  half  a  dozen 
patents  on  the  individual  sections  of  machinery — half 
a  dozen  ideas  so  interwoven  that  while  by  analysis 
one  can  separate  one  from  the  other,  one  cannot,  in 
looking  at  the  section,  pick  out  one  patented  combi- 
nation without  seeing  at  the  same  time  two  or  three 
more  patented  combinations  interwoven  with  it. 
So  much  as  to  mechanical  perfection.  Still  if  such 
mechanism  have  merit,  it  is  worth  while  producing 
as  the  rewards  for  inventing  something  for  which 
the  world  needs  are  so  great  that  the  toilers  in  the 
ranks  need  never  grow  discouraged.  A  single  inven- 
tion may  make  a  huge  fortune  for  any  inventor.  Any 
one  may  be  the  lucky  one  if  he  is  strong-minded  enough 
to  push  his  invention  rightly.  Most  sweeping,  revo- 
lutionizing inventions  belong  to  the  complicated 
types,  especially  as  concerns  the  feature  of  success- 
fully introducing  it  into  the  market.  Some  revolu- 
tionizing inventions  were  not  worked  out  in  the  United 
States.  The  Diesel  engine,  the  internal  combustion 
engine,  blast  furnace  gas  engines,  and  electrical  smelt- 


Types  of  Inventions  33 

ing  furnaces  were  all  invented  abroad  five  years  before 
ever  used  here.  The  pioneer  of  the  steam  turbine, 
Dow,  could  not  get  capital  in  this  country  to  market 
it  here  and  he  had  to  go  abroad  before  he  could 
get  it. 

The  best  type  of  invention,  therefore,  whether 
simple  or  complicated,  is  that  which  eliminates  the 
most  factors  of  uncertainty  in  establishing  a  market 
for  it.  It  is  for  this  very  reason  that  there  are  many 
businesses  in  the  United  States  that  have  been  built 
on  the  inventions  of  their  presidents.  The  industry 
of  the  inventor  in  producing,  and  patience  and  good 
judgment  in  exploiting  the  invention  have  contributed 
to  eliminate  the  natural  timidity  due  to  dependence 
on  others  for  direct  instead  of  indirect  support. 

Here,  then,  are  a  number  of  commercial  points  about 
one's  invention  which  will  prove  of  advantage  to  every 
inventor.  As  far  as  the  marketability  or  salability  of 
an  invention  is  concerned,  inventions  should  be  classi- 
fied as  follows: 

A.  Inventions  which  save  labor. 

B.  Inventions  which  save  time. 

C.  Inventions  which  save  trouble. 

D.  Inventions  which  save  money. 

E.  Inventions  which  save  annoyance. 

F.  Inventions  which   consist  in   giving   a   salable 

product  or  article  superior  merit,  where  the 
merit  may  be: 

1.  Added  service.  6.  Comfort. 

2.  Greater  utility.  7.  Convertibility. 

3.  Inter  changeability.  8.  Better  quality. 

4.  Durability.  9.  Better  control. 

5.  Convenience.  10.  Noiseless. 


34  Sale  of  Inventions 

11.  Time  saver.  15.  Duplication  of  parts. 

12.  Noninjurious.  16.  No  special  skill. 

13.  Sanitary.  17.  All  around  usefulness. 

14.  No  defects. 

Inventions  may  also  be  graded  as  to  their  com- 
mercial or  sales-pushing  value.  Make  a  survey  of 
the  number  of  probable  users  of  the  invention.  For 
example,  the  possible  sales  of  a  $5000  automobile  in 
a  city  of  thirty  thousand  people  in  which  only  a  few 
men  earn  $3000  per  year  or  over  —  as  in  certain  mill 
towns  —  is  not  directly  comparable  with  the  possible 
sales  in  a  town  of  thirty  thousand  people  of  a  purely 
residential  character,  where  three  thousand  men  may 
earn  average  salaries  in  excess  of  $3000.  But  sub- 
stitute overalls  for  the  $5000  automobiles,  and  the 
market  possibilities  are  at  once  reversed  —  for  think 
of  the  large  number  of  factory  workers.  So  always 
consider  the  territories  in  which  the  invention  is 
offered  for  sale  as  well  as  the  character  thereof. 


CHAPTER  IV 

GLEANING  THE  TALKING  POINTS  OF 
INVENTIONS 

EMPHASIZE  the  probable  profit  in  explaining 
inventions.  The  easiest  way  to  do  this  is  to 
show  that  the  invention  excludes  competition, 
or  that  the  article  has  a  variety  of  different  uses.  It 
pays  to  advertise,  and  in  advertising  one  must  dwell 
on  the  most  effective  talking  points.  These  become 
apparent  when  the  invention  has  been  elaborated 
sufficiently  to  show  just  what  it  will  do.  Talking 
points  which  generate  confidence  and  induce  action 
are  to  be  found  sometimes  in  the  article  itself  and 
sometimes  in  the  processes  of  producing  it.  Some 
inventions  require  years  of  development  before  they 
are  ready  for  marketing.  Take  the  safety  razor,  for 
example.  One  of  the  most  widely  sold  of  safety 
razors  is  the  outcome  of  seven  years  of  hard  work 
spent  not  simply  in  producing  the  original  invention 
but  in  tempering  thin  steel,  in  producing  a  handle 
to  hold  the  blade,  and  in  devising  machinery  which 
would  stamp  blades  out  of  a  ribbon  of  steel.  Few 
inventions  are  ever  developed  precisely  as  described 
in  the  patent. 

An  inventor  cannot  get  the  right  perspective  on 
his  invention  unless  he  considers  his  competitor's 
side  of  things  as  well  as  puts  himself  in  the  place  of 
the  ultimate  consumer.  An  inventor  about  to  begin 

35 


36  Sale  of  Inventions 

the  manufacture  of  his  own  patented  article  must 
be  prepared  to  meet  all  obstructive  measures  and 
arguments  from  his  competitors  laboring  in  the  same 
field.  He  should  not  start  without  first  having  con- 
sidered every  reasonable  objection  from  every  point 
of  view.  Can  they  be  met  from  the  prospect's  point 
of  view?  Minor  and  immaterial  objections  should 
be  shown  to  be  such  and  no  time  wasted  on  them. 

The  public  does  not  swarm  in  the  doors  of  inventors. 
They  must  seek  it.  Uphill  work  and  tremendous 
effort  are  necessary  to  make  an  invention  the  talk 
of  the  town.  Within  a  few  days  after  the  sinking  of 
the  Titanic,  a  writer  commenting  on  the  tragedy 
pointed  out  that  the  American  people  lack  apprecia- 
tion for  great  inventions.  Had  it  not  been  for  the 
wireless,  the  probability  is  that  the  fate  of  the  Titanic 
would  never  have  been  known. 

The  inventor  should  be  ready  to  furnish  a  written 
statement  of  the  advantages  claimed  for  his  inven- 
tion. If  the  party  approached  by  the  inventor  is  not 
thoroughly  conversant  with  the  scope  of  the  inven- 
tion and  its  commercial  aspects,  these  should  be 
explained. 

In  order  to  develop  talking  points,  think  on  the 
following  subjects:  use,  price,  quality,  color,  size, 
quantity,  shape,  style,  history  of  article,  manufacture, 
equipment,  ingredients,  public  opinion,  efficiency, 
and  distribution.  The  above  features  are  suggested 
in  a  splendid  book  on  salesmanship  by  N.  O.  Shively. 

If  the  article  is  expensive,  it  must  be  shown  that 
the  article  is  better  than  the  cheaper  grade. 

A  painted  article  would  cost  more  if  painted  by 
hand  than  if  merely  dipped. 


The  Talking  Points  of  Invention  37 

Quantity  affects  price;  if  one  manufactures  in  large 
quantities,  the  price  will  be  low. 

If  the  article  is  designed  for  many  uses,  this  may 
justify  a  high  price. 

The  ingredients  of  an  article  may  be  varied  or  few. 
The  quality  of  ingredients  will  determine  whether  the 
price  is  high  or  low.  Note  the  variety  of  the  steel  or 
iron  material  used  in  building  a  typewriter. 

An  article  may  be  difficult  to  ship  or  handle,  in 
which  case  the  price  will  be  naturally  high. 

Consider  the  various  processes  to  which  an  article 
is  subjected  in  manufacture  and  the  cost  of  securing 
raw  materials.  High  efficiency  of  an  article  may 
either  increase  or  lessen  the  price.  The  invention 
may  save  time,  effort,  or  energy.  Expert  mechanics 
may  give  the  article  quality  and  hence  fit  it  for  general 
use.  The  article  which  is  faulty  and  ill  conditioned 
because  of  poor  materials  and  poor  construction  can 
never  be  in  universal  demand. 

Public  opinion  may  cause  the  price  to  rise.  If  an 
article  is  in  great  demand,  the  price  will  advance 
accordingly.  If  the  demand  is  sluggish,  the  price  is 
low. 

The  nearness  of  the  market,  the  cost  of  transporta- 
tion and  the  difficulties  thereof,  ease  of  storage,  all 
tend  to  affect  the  price. 

If  an  article  has  a  particular  size,  the  size  may 
determine  its  practicability  and  how  extensively  it 
will  be  used.  A  large  or  a  small  article  may  be  found 
more  convenient,  economical,  and  practicable. 

The  shape  of  an  article  may  permit  many  uses  or 
few.  It  may  cause  it  to  be  inaccessible,  impractical, 
inconvenient,  or  the  reverse.  The  price  of  an  article 


38  Sale  of  Inventions 

may  make  it  prohibitive  for  commercial  use.  It  may 
be  a  luxury  and  be  used  by  a  few;  it  may  be  of  such 
a  nature  that  it  can  be  used  by  many. 

The  ingredients  may  be  of  such  a  nature  that  the 
article  can  be  used  in  all  climates  and  by  many  or 
few  people. 

The  use  of  an  article  will  suggest  many  talking 
points.  People  are  interested  only  in  the  use  they 
are  to  make  of  an  article  which  they  consider  pur- 
chasing. If  the  machine  will  do  something  a  com- 
petitor's machine  will  not,  feature  that  point.  In 
selling  office  devices,  from  a  pencil  sharpener  to  a 
mimeograph,  the  salesman  must  show  that  the  article 
will  save  time  and  energy  and  that  it  is  worth  more 
than  its  cost.  Thus  take  the  universally  used  foun- 
tain pen  as  an  example.  The  following  are  some  of 
the  talking  points: 

The  fountain  pen  can  be  used  in  almost  any  kind 
of  business. 

There  is  a  pen  to  fit  everybody's  hand. 

The  fountain  pen  is  a  time  saver  and  also  an  ink 
saver. 

It  does  away  with  carrying  a  pen  and  a  bottle  of  ink. 

It  does  not  take  up  much  room  in  a  pocket,  purse, 
grip,  or  hand  bag. 

The  safety  fountain  pens  do  not  leak. 

Better  work  can  be  done  with  the  fountain  pen 
and  in  less  time. 

It  does  not  tire  the  hand  as  a  straight  pen  will. 

There  is  always  a  considerable  number  of  such 
talking  points.  One  must  know  which  of  these  talk- 
ing points  are  most  convincing.  In  writing  out  the 
statement  of  advantages,  be  sure  to  use  the  trade 


The  Talking  Points  of  Invention  39 

nomenclature  so  that  those  who  talk  the  language  of 
the  trade  may  readily  understand. 

Do  not  overlook  .the  cost  and  expense  argument. 
It  is  the  bone  and  marrow  of  the  proposition.  An 
invention  enters  the  world's  market  in  close  com- 
petition with  other  devices  of  a  similar  nature.  If  it 
costs  more  to  make,  it  will  be  heavily  handicapped 
from  the  start.  The  inventor  will  talk  against  time  in 
trying  to  sell  it.  If  it  costs  less  to  make,  it  will  have 
this  additional  advantage  pulling  in  its  favor  from 
the  start.  An  inventor  must  always  realize  that  a 
manufacturer  is  slow  to  abandon  an  article  which 
is  giving  fairly  good  satisfaction,  where  capital  is 
looked  up  in  special  tools  and  patterns,  advertising 
matter,  and  good- will.  In  the  nature  of  things  a 
patented  article,  or  even  a  staple,  proprietory  article, 
has  a  fixed  price  and  value.  An  Eastman  Kodak  is 
the  same  the  world  over;  there  is  only  one  quality. 
That  is  not  true  of  sugar,  clothing,  print  goods,  sta- 
tionery, etc. 

Do  not  ignore  the  gigantic  puU  and  power  of  ad- 
vertising behind  many  unpatented  things.  A  new 
article,  to  succeed,  must  show  at  a  glance  that  it  is 
something  better.  It  must  have  a  sufficiently  quick 
sale.  If  an  invention  is  better  than  others,  costs 
less  to  produce,  and  has  more  talking  points,  the 
dealers  will  be  quick  to  buy  it.  Otherwise,  possibly 
not.  It  is  well  to  be  associated  with  a  manufacturer 
who  advertises  and  who  has  a  reputation  that  it  has 
cost  money  to  build  up;  one  whose  very  name  is  a 
guaranty.  But  if,  for  some  reasons,  this  cannot  be 
done,  sell  the  patent  to  the  retailer.  Do  not  ap- 
proach the  manufacturer  at  all.  Much  depends  upon 


4O  Sale  of  Inventions 

what  the  invention  is,  and  what  merit  it  has.  Re- 
member, talk  profit  all  the  time.  What  would  not 
appeal  to  the  manufacturer  as  a  profit  may  appeal 
to  an  enterprising  retailer.  Suppose  the  invention 
is  a  meritorious  hairpin.  The  retailer  could  buy  the 
patent,  have  the  article  made  by  contract,  and  elim- 
inate the  jobbers  and  a  good  part  of  the  manufac- 
turing profit,  thus  having  the  exclusive  handling  of 
the  hairpin  in  his  own  city  and  at  the  same  time  licens- 
ing its  use  in  other  cities.  In  this  way,  after  public 
demand  is  created  and  trade  in  the  article  is  brisk, 
the  retailer  will  find  public  patronage  increasing  in 
other  articles  he  sells.  The  retailer  should  be  located 
in  a  large  city  so  that  the  inventor  may  be  assured 
of  a  royalty  on  the  invention  from  the  start. 


CHAPTER  V 

HOW  PATENTS  EXCLUDE;  PRACTICAL 
EXAMPLES 

A  PATENT  is  made  useful  by  a  series  of  strong 
claims.  The  claims  are  the  most  important 
part  of  the  specification  of  a  patent  and  the 
most  difficult  feature  of  patent  work.  A  claim  is 
ordinarily  that  part  of  the  patent  which  is  least  under- 
stood by  an  inventor.  The  popular  idea  of  a  patent 
claim  is  that  it  signifies  some  special  or  signal  ad- 
vantage which  an  inventor's  device  has  over  others. 
But  this  is  a  wrong  conception.  A  patent  claim  is 
a  unit  of  protection  for  an  invention  and  defines  in 
plain  terms  the  amount  of  protection  accorded  to  a 
new  invention.  The  more  claims  that  a  patent 
possesses,  the  stronger  will  be  the  excluding  power  of 
this  patent  against  infringers,  as  it  is  the  office  of  any 
single  claim  to  bring  out  a  series  of  parts  related 
together  in  point  of  cooperation,  effect,  function,  and 
utility,  or  acting  in  a  definite  manner.  Since  some 
parts  of  a  device  may  be  infringed  or  sought  to  be 
used,  and  other  parts  not,  it  is  necessary  to  protect 
each  part  separately. 

The  whole  patent  system  hinges  upon  patent  pro- 
tection of  a  definite  character.  The  protection  is 
accorded  by  the  courts  and  is  measured  by  the  Patent 
Office.  A  claim  is  that  part  of  a  specification  which 
defines  what  the  inventor  regards  as  new  over  the 

4* 


42  Sale  of  Inventions 

"  prior  art."  Before  any  claim  can  be  written  and 
included  in  a  patent,  the  condition  of  the  particular 
art  to  which  the  claim  relates  must  be  ascertained  in 
order  to  learn  what  others  have  done  before.  Once 
a  decision  is  formed  as  to  the  breadth  and  scope  of 
the  invention,  suitable  language  is  employed  to  define 
this  invention  and  the  result  is  a  claim.  A  successful 
claim  writer  must  be  nine  tenths  a  mechanic  and 
one  tenth  a  lawyer.  A  successful  claim  writer  must 
be  a  good  scientist,  mechanical  expert,  and  a  phil- 
osopher at  the  same  time.  A  claim  is  also  a  unit  of 
novelty,  must  contain  no  hidden  meaning,  and  must 
be  for  a  structure  which  will  operate.  A  sufficient 
number  of  parts  must  be  recited  for  this  purpose, 
otherwise  the  claim  will  not  protect  so  as  to  exclude 
others  from  supplying  perhaps  an  obvious  omission 
and  thus  making  the  real  invention  with  impunity. 
Every  element  in  a  claim  is  material,  and  the  courts 
passing  on  infringing  devices  will  consider  them  all 
material.  A  claim  is  either  broad  or  specific  accord- 
ing to  the  nature  of  the  invention  and  the  terms  em- 
bodied in  the  claim  to  particularize  the  protected 
features.  But  no  claim  can  be  so  broad  in  language 
as  to  cover  not  only  every  variety  of  equivalent  struc- 
ture falling  within  its  terms  or  scope,  but  other  in- 
ventions as  well,  not  similar  in  principle. 

Many  patents  are  issued  with  bad  claims  so  that 
the  protection  accorded  in  them  is  devoid  of  signifi- 
cance. The  result  is  that  these  patents  cannot  and 
will  not  exclude  infringers  and  are  fit  for  the  waste- 
paper  basket.  The  inventions  may  be  excellent,  but 
the  patents  obtained  to  protect  them  are  worthless. 
To  enable  the  reader  to  judge  what  kind  of  claims  are 


How  Patents  Exclude  43 

worthless,  some  examples  will  suffice  to  explain  general 
principles  of  patent  protection  by  means  of  patent 
claims.  We  will  take  the  bicycle  as  an  object  lesson 
in  analyzing  claims,  and  for  the  moment  we  will  as- 
sume that  the  bicycle  is  a  brand-new  device  and 
never  existed  before. 

A  bicycle  is  a  type  of  road  vehicle  or  conveyance 
where  power  is  applied  by  the  feet  of  a  rider  to  one 
of  two  sustaining  wheels.  The  frame  or  balancing 
member  of  a  bicycle  consists  of  rods,  two  of  which  are 
in  the  form  of  uprights  or  forks  arranged  at  the  ends 
of  the  frame,  there  being  a  V-shaped  brace  connecting 
these  uprights.  Revolvably  mounted  in  the  fork 
ends  of  these  uprights  are  wheels  which  are  held  in 
alignment  and  journaled  upon  axles.  The  front  up- 
right has  its  upper  portion  loosely  arranged  so  as  to 
turn  or  swivel  in  a  suitable  bearing  provided  by  the 
frame,  and  as  the  front  wheel  is  mounted  in  this  fork, 
means  is  thus  provided  for  turning  or  steering  the 
front  wheel.  A  sprocket  gear  is  secured  to  the  axle 
of  the  rear  wheel,  and  another  sprocket  gear  is  at- 
tached to  a  shaft  journaled  in  the  lower  portion  of 
the  V-shaped  brace.  A  sprocket  chain  is  trained 
upon  both  sprocket  gears.  Cranks  are  secured  upon 
the  last-named  or  front  sprocket  gear  and  are  ac- 
tuated by  pedals.  The  rider  is  supported  on  the  seat 
so  that  his  legs  straddle  the  frame  and  his  feet  may 
engage  the  pedals  so  as  to  set  the  chain  in  motion  to 
propel  the  device.  By  means  of  the  rider's  hands  engag- 
ing the  handle  bars  to  direct,  guide,  and  steer  the 
bicycle  and  his  feet  which  rotate  the  sprockets  and  pro- 
pel the  device  along,  the  bicycle  is  maintained  under 
equilibrium  and  the  frame  suitably  balanced,  in  motion. 


44  Sale  of  Inventions 

It  is  proposed  to  write  a  patent  claim  on  the  bicycle 
as  described  above  which  should  be  as  broad  in  scope 
as  is  possible  and  yet  cover  an  operative  structure. 
The  first  thing  to  consider  is,  What  are  the  fewest 
number  of  parts  which  will  make  an  operative  struc- 
ture in  a  bicycle?  Having  discovered  these  essential 
elements,  the  next  thing  to  do  is  to  combine  them  in 
a  way  which  will  bring  out  their  proper  relationship. 
These  elements  are  to  be  combined  in  an  orderly,  sys- 
tematic way  in  a  logical  sequence,  regard  being  had 
to  cause  and  effect.  The  mere  addition  or  inclusion 
of  a  number  of  elements  in  a  claim  without  placing 
those  related,  cooperating,  or  coacting  together,  results 
either  in  an  impossible  structure  or  else  in  an  imprac- 
ticable device.  Note  claim: 

i.  A  device  of  the  character  described  comprising 
a  frame,  oppositely  arranged  wheels  disposed  in  align- 
ment in  said  frame,  a  seat  on  said  frame,  driving  mecha- 
nism controlled  by  the  feet  of  a  rider,  and  means  con- 
trolled by  the  hands  of  the  rider  for  guiding  said  wheels. 

This  is  a  good  claim  and  will  protect  the  bicycle 
invention  because  it  excludes  any  one  from  making  a 
vehicle  running  on  two  wheels  arranged  in  a  straight 
line  connected  by  a  frame  having  a  seat  thereon,  and 
equipped  with  foot-controlled  driving  mechanism  and 
and  hand-controlled  guiding  or  steering  mechanism. 
It  defines  a  bicycle  in  good  set  terms  and  nothing 
else,  and  states  the  fewest  operative  essential  parts.  It 
does  not  refer  to  any  part  of  the  bicycle  specifically, 
and  whenever  the  term  "  means  "  is  used,  it  is  broad 
enough  to  include  any  arrangement  of  parts  or  device 
capable  of  performing  the  function  required.  For 
example,  the  means  for  impelling  said  wheels  (con- 


How  Patents  Exclitde  45 

trolled  by  the  feet  of  a  rider)  might  be  pedals  and 
a  sprocket  and  chain  drive,  or  may  consist  of  inter- 
meshing  gears,  or  of  depressible  actuating  means  con- 
nected by  a  crank  and  pitman  to  the  rear  wheel,  or 
any  other  device,  either  patented  or  not,  which  will 
operate,  when  placed  on  the  frame  and  in  engage- 
ment with  either  wheel,  to  rotate  the  latter. 

2.  In   combination,   wheels ,   a  frame   supported   on 
said  wheels,  means  for  setting  said  wheels  in  motion, 
and  means  for  enabling  the  rider  to  steer  the  wheels. 

This  claim  is  so  broad  that  it  covers  and  defines 
not  only  a  bicycle  but  any  vehicle.  This  makes 
the  claim  faulty,  wide  of  the  mark,  and  invalid  as  a 
bicycle  claim,  because  the  wheels  are  not  limited  to 
two  wheels.  An  automobile  with  four  wheels  and  a 
velocipede  with  three  wheels  would  both  come  within 
the  terms  of  this  claim,  because  each  includes  means 
for  setting  the  wheels  in  motion  and  means  enabling 
the  rider  to  steer  the  wheels.  The  limitation  of  Claim 
i  —  that  the  propelling  means  is  foot-controlled  and 
the  steering  means  hand-controlled  —  is  eliminated 
in  Claim  2,  and  while  it  makes  the  claim  broader,  it 
either  fails  to  describe  or  misdescribes  a  bicycle  and 
is  therefore  worthless.  It  would  not  be  allowed  by 
the  Patent  Office,  as  it  does  not  feature  the  device 
known  as  a  bicycle,  and  that  is  what  the  claim  is  sup- 
posed to  do  in  its  application  to  the  bicycle  under 
consideration. 

3.  A  bicycle  composed  of  a  balancing  member  having 
a  seat,  wheels  for  supporting  said  balancing  member, 
motion-transmitting    mechanism  for    said   wheels,    and 
means  whereby  said  balancing  member  may  be  controlled 
by  the  hands  of  a  driver. 


46  Sale  of  Inventions 

This  is  a  good,  well-laid  claim  and  is  very  broad  in 
scope.  It  protects  not  only  a  bicycle  but  all  fair 
mechanical  equivalents  thereof.  It  would  cover  a 
motor  cycle  as  well  as  a  bicycle,  for  in  both  cases  a 
"  balancing  member "  is  included  and  suggests  so 
many  wheels  only  as  may  be  arranged  to  permit  the 
member  to  be  balanced  thereupon.  Thus  three  wheels 
could  be  arranged  in  alignment,  and  as  in  this  way 
a  member  or  frame  would  still  be  balanced,  it  would 
be  protected  and  covered  by  Claim  3,  where  Claim  i 
or  Claim  2  would  fail  to  protect  this  possible  structure. 
A  motor  cycle  also  has  motion-transmitting  mecha- 
nism for  its  wheels,  and  while  in  a  bicycle  the  handle 
bars  enable  the  rider  to  steer  and  maintain  the  equi- 
librium of  the  device  or  frame,  in  a  motor  cycle  the 
stopping  mechanism  for  the  device  may  also  be  lo- 
cated upon  the  handle  bars.  So  the  term  "  controlling 
means "  may  be  broad  enough  to  cover  any  such 
mechanism,  as  it  does  not  specify  any  kind  of  control. 

4.  A  device  of  the  kind  described,  comprising  a  support, 
wheels  mounted  in  said  support,  and  means  for  enabling 
a, driver  to  propel  and  guide  the  wheels. 

This  claim  is  misleading  and  misdescriptive,  as  it 
does  not  correctly  recite  the  proper  mechanism  which 
is  actually  found  in  a  bicycle.  It  tends  to  encumber 
rather  than  to  protect.  It  does  not  enable  one  to 
determine  just  what  a  bicycle  is  as  distinguished  from 
other  conveyances.  This  claim  is  vague  and  in- 
complete, because  the  last  clause  refers  to  two  wholly 
unrelated  parts  of  the  same  device.  Propelling  the 
bicycle  calls  for  one  instrumentality,  while  steering 
it  calls  for  another.  Two  pieces  of  mechanism  should 
never  be  claimed  as  one  piece,  and  should  never  be 


How  Patents  Exclude  47 

included  under  the  broad  term  of  "  means  "  if  their 
functions  are  different.  The  functions  of  two  pieces 
of  mechanism  are  different  when  one  part  would  per- 
form its  function  just  as  well  as  if  the  other  part  were 
absent  and  vice  versa,  i.e.,  where  the  two  parts  do 
not  cooperate  to  produce  a  single  Junction.  The 
mechanism  for  driving  the  wheels  of  the  bicycle  must 
be  able  to  operate  whether  the  device  is  complete 
with  a  steering  mechanism  or  not.  If  one  mechanism 
is  defective,  the  other  is  not  necessarily  so.  In  other 
words,  in  a  bicycle  there  is  no  single,  unitary,  or  in- 
separable means  for  enabling  the  rider  both  to  impel 
the  machine  as  well  as  to  steer  it.  One  means  is 
independent  of  the  other  and  should  be  included 
separately  in  the  claim.  The  clause  should  be  ren- 
dered as  follows:  Means  for  enabling  a  driver  to 
propel  the  wheels  and  means  for  enabling  him  to 
steer  the  wheels.  The  claim  should  also  be  amended 
to  bring  out  the  fact  that  the  support  is  mounted  on 
two  wheels,  as  this  is  necessary  to  make  it  refer  to  a 
bicycle. 

5.  In  a  device  as  described,  the  combination  of  two 
wheels,  rods  connecting  said  wheels,  pedal-operated 
means  arranged  to  rotate  the  wheels,  and  means  whereby 
one  wheel  may  be  swiveled. 

This  is  a  good  claim  and  is  more  specific  than 
either  Claims  i  or  2,  inasmuch  as  it  recites  pedals 
adapted  to  rotate  the  wheels,  i.e.,  a  particular  kind 
of  propelling  mechanism  or  actuating  means  therefor, 
and  also  specifies  that  the  guiding  or  steering  is  effected 
by  swiveling  one  of  the  wheels  relatively  to  the  other 
wheel.  Note  that  this  claim  does  not  state  how  the 
pedals  are  arranged  to  operate  the  motion-trans- 


48  Sale  of  Inventions 

mitting  mechanism,  whether  by  means  of  cranks 
secured  to  a  gear  or  not,  or  whether  the  pedals  are 
mounted  on  any  particular  wheel  or  not.  Of  course 
a  velocipede  is  also  operated  by  means  of  pedals 
and  also  has  one  wheel  which  may  be  swiveled  rel- 
atively to  the  others,  and  rods  making  up  the  frame. 
But  this  claim  recites  two  wheels,  and  a  velocipede 
has  three  wheels.  It  is  easy  to  balance  a  three-sided 
vehicle,  or  a  vehicle  mounted  on  three  wheels,  two 
in  back  and  one  in  front,  and  to  allow  the  front  wheel 
to  swivel.  But  a  new  problem  is  involved  in  making 
two  wheels  do  what  it  took  three  wheels  to  do  before. 
Therefore  this  claim  is  definite,  defines  a  bicycle,  and 
would  exclude  others  from  making  an  arrangement 
covered  by  its  terms. 

6.  The  combination  with  wheels,  of  a  device  for  ro- 
tating said  wheels,  and  means  whereby  one  wheel  may 
steer  the  other  wheel. 

This  claim  is  defective  as  being  obscure,  incom- 
plete, and  ambiguous.  Every  element  in  a  claim  should 
be  recited  positively  and  not  inferentially;  the  last 
clause  intimates  that  one  wheel  may  steer  the  other 
wheel,  yet  the  first  clause  does  not  specify  the  number 
of  wheels.  It  would  be  correct  to  say,  "  the  com- 
bination with  two  wheels,"  etc.  This  claim  is  mis- 
descriptive  of  a  bicycle,  as  there  is  nothing  in  this 
claim  to  distinguish  a  bicycle  from,  say,  a  toy  train 
running  on  tracks.  If,  however,  this  claim  mentioned 
"  a  frame  supported  on  the  wheels,"  mentioning 
two  wheels  positively,  a  bicycle  would  then  be  sug- 
gested even  if  the  claim  omits  to  mention  the  fact 
that  one  wheel  is  steered  manually  or  by  means  of 
a  person,  for  there  is  no  reason  for  so  limiting  the  claim 


How  Patents  Exclude  49 

as  thus  simplified.  To  do  so  would  be  to  restrict  the 
range  of  equivalents  the  claim  could  cover.  This  is 
what  makes  word  play  so  important  in  claims.  Sup- 
pose a  vehicle  were  propelled  automatically  on  two 
grooved  wheels  running  on  circular  tracks,  of  course 
one  wheel  in  following  the  curvature  of  the  track  could 
be  made  to  steer  the  other  wheel.  By  avoiding  the 
inclusion  of  unnecessary  limitations  in  this  claim  it 
is  broadened  in  scope  so  as  to  include  this  possible 
structure.  By  amending  or  revising  this  claim  to 
mention  the  frame  supported  on  two  wheels,  it  will 
be  seen  that  the  device  denned  could  not  be  confused 
with  some  part  of  a  machine  fixed  on  a  table,  etc. 
In  other  words,  cured  as  suggested,  this  claim  would 
be  broader  than  any  of  the  previous  claims,  as  it 
would  fence  around  a  wide  range  of  variations. 

7.  In  combination,  a  frame  including  a  V-shaped 
brace,  handle  bars  on  the  frame,  two  wheels  mounted  in 
alignment  within  the  frame,  means  for  rotating  said 
wheels,  a  post  on  said  frame  projecting  above  one  of 
the  wheels,  and  a  seat  secured  to  said  post,  said  handle 
bars  being  swivelable. 

This  claim  differs  from  the  preceding  claims  in 
matter  of  protecting  certain  details  of  the  framework 
of  a  bicycle  set  forth;  to  wit,  a  frame  having  a  seat 
post  projecting  above  one  of  the  wheels  and  mounted 
on  the  bicycle  frame.  This  supports  the  rider  in 
proper  position  to  enable  his  hands  to  engage  the 
handle  bars  also  mounted  on  this  frame  and  so  steady 
and  properly  balance  the  device.  The  claim  is  very 
bad,  as  it  would  not  exclude  others  from  making 
either  the  particular  device  covered  by  the  terms  of 
this  claim  or  the  device  which  the  inventor  evidently 


$0  Sale  of  Inventions 

intends  to  protect  thereby.  It  would  drag  in,  head  and 
shoulders,  many  unnecesary  parts.  The  V-shaped 
brace  is  an  unnecessary  feature  in  the  claim  and 
is  therefore  a  needless  limitation.  It  is  like  put- 
ting butter  upon  bacon.  It  does  no  good  as  a  pro- 
tecting feature,  but  does  a  positive  harm  and  is 
oppressive.  Suppose  a  different-shaped  brace  were 
substituted  for  the  V-brace  by  an  interested  party; 
clearly  he  would  not  infringe  this  claim  even  if  other- 
wise he  employed  all  the  other  really  essential  parts. 
Again,  why  mention  that  the  handle  bars  swivel 
without  showing  what  they  swivel,  so  far  as  the  pro- 
tective parts  of  this  claim  are  concerned?  A  party 
may  make  the  device  without  the  steering  handle  bars 
and  assert  that  as  the  claim  fails  to  specify  any  con- 
nection between  these  swivelable  bars  and  the  front 
wheel,  the  inventor  did  not  intend  to  cover  a  swivel- 
able  front  wheel.  The  party  would  therefore  make 
the  front  wheel  turn  and  would  not  infringe  this  claim. 
In  the  event  he  does  not  make  either  the  front  wheel 
or  the  handle  bars  thereon  turn,  but  uses  all  the  re- 
maining parts  mentioned  in  Claim  7  above,  he  would 
still  not  infringe.  His  just  defense  would  be  that 
making  the  handle  bars  swivel  on  the  frame  is  either 
an  inessential  limitation  so  far  as  denning  a  complete 
device  is  concerned,  or  it  makes  the  entire  claim  cover 
an  impracticable  if  not  an  inoperative  device,  because 
if  the  handle  bars  could  easily  swivel  without  the 
front  wheel,  it  would  tend  to  render  the  entire  frame 
unsteady  and  in  fact  would  prevent  the  frame  being 
balanced.  In  claim  writing  as  in  argument,  "  least 
said  is  soonest  mended." 


CHAPTER  VI 
DEVELOPING  INVENTIONS 

INVENTIONS,  as  a  general  rule,  have  to  be  de- 
veloped.   There  is  a  clear  necessity  for  this  in 
order  to  demonstrate  whether  or  not  the  inven- 
tion will  work,  and,  if  it  does,  its  degree  of  fitness  for 
the  work  intended.     This  development  is  a  necessity 
alike  to  the  inventor  and  to  the  capitalist  seeking  to 
acquire  an  interest  in  inventions  under  advantageous 
conditions. 

Inventors  and  capitalists  should  be  more  ready  to 
cooperate.  The  capitalist  should  join  with  and  en- 
courage the  inventor.  Let  him  take  an  interest  by 
assignment  and  pay  the  expenses  of  manufacture. 
Brains  and  knowledge  are  valuable  and  necessary 
and  are  the  primary  causes  of  invention,  but  the 
inventor  cannot  obtain  protection  and  try  his  in- 
vention practically  without  money.  It  is  a  heavy 
pull  upon  the  purse.  The  capitalist  should  match 
the  inventor's  brain  with  cash  and  join  hands  with 
him,  not  merely  as  a  trial  but  with  a  determination 
to  succeed  in  reducing  the  device  to  demonstration. 
If  the  investor  waits  until  the  inventor  obtains  a 
patent  and  shows  the  value  of  his  invention,  he  may 
find  that  the  price  for  an  interest  in  the  patent  is  more 
than  he  cares  to  pay.  Successful  inventors  have 
almost  universally  had  the  assistance  of  capitalists, 
not  only  after  the  inventor  acquired  fame,  but  at 

51 


52  Sale  of  Inventions 

the  time  the  embryo  invention  was  in  a  state  of  un- 
certainty. 

A  model  is  best  calculated  to  win  friends  who  ap- 
prove and  who  will  help  financially.  The  only  in- 
ventions that  count  are  those  that  emanate  from  men 
who  understand  the  business.  As  concerns  inventions, 
an  inventor  with  a  practical  demonstrative  model 
and  a  manufacturer  with  the  wisdom  to  back  him 
with  money  and  faith  both  offer  the  best  possible 
teamwork  for  success.  There  are,  of  course,  some 
exceptions  to  making  models,  as  some  inventions 
cannot  easily  be  experimented  upon.  Such,  for  ex- 
ample, would  be  an  improvement  on  a  suspension 
bridge,  a  new  type  of  locomotive  boiler,  or  a  novel 
method  of  building  construction;  but  as  a  rule,  al- 
ways make  a  model  for  experimental  purposes. 

This  model  should  be  of  a  working  size  and  dressed 
up  neatly,  should  show  all  the  features  of  the  inven- 
tion, should  be  strong  and  durable,  and  should  operate 
satisfactorily  for  all  purposes  of  practical  demonstra- 
tion. It  should  not  be  of  an  expensive  kind,  because 
it  may  be  necessary  to  add  more  parts  or  to  entirely 
change  the  fundamental  idea  of  the  invention.  Let 
it  remain  on  the  "  anvil "  long  enough  to  be  put  in 
good  trim.  The  model-maker  should  have  all  the 
facilities  at  hand  for  constructing  a  neat  article,  and 
when  it  is  done,  it  should  perform  its  allotted  function. 
Try  it.  Try  it  completely  and  under  service  condi- 
tions. It  will  be  time  well  spent.  Consider  carefully 
how  it  can  best  be  made.  After  an  idea  has  been  per- 
fected, an  expert  mechanic  should  be  consulted  to 
find  out  how  the  model  should  be  constructed.  Should 
it  be  cast  or  forged  or  stamped?  Can  it  be  made  in 


Developing  Inventions  53 

a  shop  or  does  it  require  hand  work?  Is  it  difficult  or 
expensive  to  assemble?  Can  it  be  pieced  together 
when  in  need  of  repair? 

A  model  should  not  depart  too  far  from  the  speci- 
fications of  the  patent.  First  send  the  model  to 
prospects,  then  the  patent  papers,  but  only  after 
interest  in  the  model  has  been  displayed.  Always 
examine  whether  the  patent  will  protect  the  construc- 
tion as  shown  by  the  model.  An  inventor  should 
determine  whether  a  patent  corresponds  to  the  model 
as  constructed. 

Inventors  who  have  rushed  their  patent  applica- 
tions, sometimes  depart  from  their  patent  in  making 
their  final  model  to  such  an  extent  that  their  ultimate 
construction  is  outside  the  claims.  There  is  a  case 
in  which  a  manufacturer  bought  a  patent  based  on 
the  opinion  of  his  attorney  to  whom  he  had  neglected 
to  submit  his  model.  This  later  involved  him  in  liti- 
gation owing  to  this  condition  developing.  There  is 
no  doubt  that  numerous  patents  are  carefully  reposing 
in  manufacturers'  safes  under  similar  circumstances. 

Most  patented  inventions  have  to  go  through  a 
regular  process  of  development.  It  is  so  with  small 
inventions;  it  is  so  with  large  or  important  inventions. 
The  Edison  lamp  patent,  for  example,  did  not  show 
a  structure  which,  as  described,  was  of  commercial 
value  by  itself,  but  it  soon  became  of  enormous  value 
to  the  public  because  other  inventions  were  added  to 
it.  The  first  Bell  telephone  could  barely  convey  speech. 
What  difference  did  it  make?  The  idea  was  there, 
and  inside  of  eighteen  months  or  two  years  other 
improvements  were  added  and  we  had  first-class 
telephones.  This  is  often  the  way  in  which  an  inven- 


54  Sale  of  Inventions 

tion  becomes  fixed  in  form  and  substance.  There- 
upon it  is  ready  to  form  the  basis  of  a  manufacturing 
industry  and  to  insure  the  greatest  measure  of  suc- 
cess to  the  inventor.  The  patent  itself  does  not 
create  the  industry,  but  the  patented  thing  does. 
Why  does  an  inventor  expect  a  busy  manufacturer 
to  be  interested  on  the  receipt  of  a  copy  of  a  patent 
describing  his  invention?  Can  he  reasonably  be  sup- 
posed to  take  the  time  and  sit  up  nights  in  order  to 
analyze  a  set  of  patent  claims  and  study  out  the  opera- 
tion of  the  invention  from  a  drawing  without  a  model? 
The  manufacturer  prefers  to  see  the  thing  itself.  He 
wants  a  clear  stage  before  he  parts  with  ready  money. 
Assuming  that  everything  is  in  readiness  for  making 
a  model,  what  kind  of  model  should  be  made?  One 
that  will  stand  the  inventor  or  his  backer  the  least 
expense.  Models  of  small  or  simple  mechanisms,  or 
perhaps  of  parts  of  these  mechanisms,  are  frequently 
made  at  the  expense  of  a  few  dollars.  In  many  cases 
the  inventor  himself  is  able  to  construct  the  working 
model,  thus  avoiding  most  of  the  expense  of  experi- 
mental work.  Occasionally  a  device  is  so  simple 
and  obvious  as  to  require  no  work  of  this  kind.  As  a 
general  rule  experimental  work  and  model  making 
should  be  on  the  smallest  scale  that  will  satisfactorily 
demonstrate  the  mechanism.  It  is  almost  inevitable 
that  the  new  device  will  require  many  changes  from 
the  first  design  and  will  show  many  possibilities  of 
improvement.  In  model  work  the  usual  charge  made 
is  for  tune  and  material.  One  should  choose  smaller 
shops  in  preference  to  larger  ones  in  order  to  make 
sure  that  the  work  will  receive  the  individual  atten- 
tion it  deserves.  After  a  working  and  commercially 


Developing  Inventions  55 

successful  model  has  been  made,  the  next  thing  to  do, 
upon  finding  out  the  good  talking  points,  is  to  write 
a  letter  to  the  manufacturer  stating  the  advantages 
of  one's  invention  and  informing  him  that,  if  he  is 
interested,  a  working  model  will  be  submitted  for 
examination.  Create  commercial  interest  before  at- 
tempting to  submit  the  proof  of  the  legal  strength 
of  the  invention,  if  one  must  take  up  the  negotiation 
by  correspondence.  If  one  cannot  make  a  model, 
or  have  it  made,  it  is  better  not  to  bother  with  inven- 
tions, in  connection  with  which  making  a  model  is 
the  last  step  which  wins. 


CHAPTER  VII 
SUCCESS  IN  INVENTING 

"ITIT  THAT  are  the  things  necessary  to  make  an 
Y/V  inventor  successful  in  pushing  his  invention? 
What  should  the  inventor  do  to  overcome 
certain  drawbacks?  Every  day  these  questions  loom 
up.  The  answer  will  be  found  by  gauging  the  work 
of  successful  inventors  whose  number  is  legion.  It 
is  estimated  that  patentees  of  the  United  States  have 
paid  Uncle  Sam  about  $7,000,000  in  excess  of  the 
expenses  of  the  Patent  Office.  This  is  significant. 
The  amount  earned  by  inventors  themselves  defies 
belief.  How  much  of  this  are  you  getting? 

The  question  is,  What  is  the  earning  capacity  of 
the  reader's  brain?  The  average  man  uses  only 
twenty-five  per  cent  of  his  brain  power.  If  one 
wants  to  succeed  and  has  courage  and  persistence, 
nothing  can  hinder  him.  If  a  man  thinks  optimistic 
thoughts,  nothing  in  the  world  can  keep  him  from 
being  an  optimist.  Success  always  means  a  fight. 
"  I  can't "  is  not  in  the  business  vocabulary.  The 
only  difference  between  a  genius  and  a  failure  is  that 
a  genius  knows  no  such  word  as  "  quit."  The  genius 
always  takes  the  bit  between  the  teeth.  One  must 
be  a  bigger  man  and  a  better  man  today  than  those 
who  succeeded  a  generation  ago.  The  greatest  and 
best  things  in  life  do  not  come  by  chance  or  in  a 

56 


Success  in  Inventing  57 

twinkling.  These  things  are  always  the  result  of 
some  effort  based  on  a  definite  plan. 

In  these  arduous  times  people  must  be  trained  in 
order  to  succeed  amidst  the  concourse  of  brains. 
The  work  of  a  new  era  is  now  before  us.  It  has  been 
well  said  that  the  great  world  war  was  a  war  of  the 
scientist  and  engineer.  It  was  a  race  of  skill  between 
the  inventors  of  waning  nations.  And  success  can 
be  obtained  only  where  the  intellectual  faculties  are 
in  a  receptive  condition. 

Suggestion  never  can  accomplish  that  which  is  not 
backed  up  by  real  ability.  Will  power  is  the  power 
eternally  to  hold  on  to  the  right  in  the  face  of  opposing 
wrong,  to  court  success  in  the  face  of  opposing  ob- 
stacles. It  is  the  power  of  eliminating  those  actions 
and  desires  which  are  not  compatible  with  future 
development  and  nourishing  those  which  are.  That 
gives  real  power  to  the  will. 

In  anything  that  one  does,  the  smile  and  pleasing 
countenance  carry  great  weight.  Concentration  is 
the  ability  to  hold  the  mind  on  one  object  to  the  ex- 
clusion of  all  others.  If  one  desires  to  influence  others, 
one  must  have  confidence  in  one's  power  to  do  so. 
The  extent  of  one's  personality  will  be  determined  by 
the  strength  of  one's  will  and  the  power  of  concen- 
tration. As  long  as  one  will  continue  to  drink  in 
knowledge  there  can  be  no  blighted  hope. 

Let  no  one  be  discouraged  with  his  present  con- 
dition. Let  his  thoughts  be  hopeful.  People,  business 
firms,  are  not  pitted  against  the  inventor,  so  he  need 
not  worry  about  this.  No  matter  how  old  one  is, 
things  are  ripe  today  for  success.  In  reality,  age 
has  nothing  whatever  to  do  with  effort  or  ability. 


58  Sale  of  Inventions 

Since,  in  1918,  the  draft  age  was  raised,  there  is  a 
movement  afloat  to  boost  the  man  advanced  in  years 
as  an  instrument  in  business.  Many  writers  have 
taken  up  the  cudgel  in  behalf  of  the  superannuated 
to  show  that  they  are,  by  reason  of  their  experience, 
able  to  accomplish  good  work  in  spite  of  their  years, 
and  much  better  work  than  some  young  people. 
Remember  that  man's  greatest  work  must  be  done  in 
later  life.  It  is  then  that  he  can  profit  by  the  ex- 
periences of  his  youth;  but  if  he  lacks  the  energy, 
force,  and  vitality  that  would  obtain  results,  his 
later  life  is  sure  to  be  a  failure.  There  never  was  a 
better  time  for  men  who  actually  know,  to  succeed. 

Technical  magazines  are  helping.  For  example,  the 
Lighting  Journal  publishes  complete  monthly  lists  of 
the  latest  inventions  relating  to  lighting.  Interested 
firms  are  going  after  inventors  who  have  things  they 
need.  A  rich  concern,  interested  in  a  patented  in- 
vention, is  not  going  to  hesitate  when  it  comes  to 
buying  inventions  it  needs.  If  it  knows  of  a  dozen 
men  who  have  been  working  for  years  on  a  particular 
invention,  —  who  are  working  at  it  from  different 
viewpoints  and  going  to  arrive  at  the  same  results 
by  different  routes,  —  it  will  buy  all  the  inventions 
and  not  take  a  chance  to  find  out  which  is  the  most 
valuable.  Such  pieces  of  good  fortune  are  not  rare. 

Good  management  of  a  patented  article  makes  the 
person  a  fitter  instrument  for  success  than  the  thing. 
Mr.  Edison  succeeded  in  making  his  invention  a  suc- 
cess, because  at  the  last  moment  there  came  capital 
enough  to  him  and  talent  enough  to  put  it  forward. 
In  ninety-nine  cases  out  of  a  hundred  it  is  necessary 
for  an  inventor  to  find  some  assistance  outside  of  his 


Success  in  Inventing  59 

own  capital.  If  a  man  is  trained,  he  will  have  no 
difficulty  in  doing  things  for  himself,  but  if  not,  he 
certainly  can  succeed  by  finding  the  right  man.  Every 
man  must  be  prepared  for  his  work;  it  takes  years  of 
training  to  do  so,  but  when  he  is  able  to  use  the  next 
man's  skill,  he  does  not  need  all  this  training.  Mr. 
Carnegie  frankly  insisted  that  the  men  who  worked 
under  him  were  smarter  than  he;  but  his  keen  selec- 
tion of  men  to  do  the  work  he  could  not  do  as  well 
himself  proved  a  casting  weight  and  had  a  good  deal 
to  do  with  his  uplifting.  It  requires  more  grit,  more 
talent,  more  training,  to  sell  goods  today  than  it 
did  ten  years  ago.  A  good  sale  brings  mutual  profits. 
A  patented  article  appeals  to  the  modern  business 
man  because  of  its  price-fixing  tendency.  One  half 
of  those  who  sell  patented  goods  today,  are  main- 
taining price  and  find  it  one  of  the  best  things  for 
their  industries  that  could  possibly  happen. 

When  a  patented  article  is  taken  up  for  sale  by  an 
enterprising  business  firm,  the  primary  objective  is 
to  get  a  secure  foothold  on  the  market  so  as  to  shut 
out  not  only  unpatented  articles  but  patented  articles 
of  rival  firms  as  well.  Take  the  case  of  the  United 
Shoe  Machinery  Company.  The  reason  why  this 
big  concern  has  developed  its  large  business  is  that  it 
makes  the  best  machinery  and  all  the  machinery  a 
manufacturer  wants.  He  does  not  have  to  go  to  this 
town  or  that  town  and  this  man  or  that  man  to  get  a 
complete  equipment.  In  each  shoe  town  or  shoe 
center  the  company  keeps  a  corps  of  skilled  men  ready 
instantly  to  repair  or  adjust  any  machines  which  get 
out  of  order  so  that  the  shoe  manufacturer  has  to 
deal  with  only  one  concern.  If  any  machine  gets 


60  Sale  of  Inventions 

out  of  order,  the  company  sends  a  man  to  repair  and 
adjust  it.    It  pays  them  to  do  it. 

There  is  thus  nothing  magical  or  impossible  about 
inventions.  Success  means  optimism  and  opportunity 
and  above  all  preparedness.  Take  the  statement  of 
one  of  the  very  best  authorities,  Thomas  Ewing,  who 
until  recently  was  Commissioner  of  the  United  States 
Patent  Office.  He  says:  "  With  the  exception  of  but 
one  plant,  which  has  been  unfortunate,  every  man 
with  whom  I  have  been  associated  to  any  considerable 
extent  in  the  last  twenty  years  has  done  well  with  his 
invention.  He  has  improved  his  position;  he  has  even 
made  money  by  the  sale  of  his  product  or  he  has 
gotten  associations  that  have  helped  him,  and  he  has 
been  enabled  to  develop  his  patent  lines  and  has  gotten 
ahead  faster  and  better  than  he  would  without  them." 
Another  important  authority,  Justice  Brandeis  of  the 
United  States  Supreme  Court,  who  was  formerly  coun- 
sel for  the  United  Shoe  Machinery  Company,  stated 
that  three  things  are  necessary  to  prosecute  an  inven- 
tion successfully:  First,  you  need  a  good  invention; 
secondly,  you  need  ample  capital;  thirdly,  you  need 
good  management.  How  to  obtain  all  this  is  what 
it  is  proposed  to  take  up  in  subsequent  chapters. 


CHAPTER  VIH 
TEE  DEMAND  FOR  INVENTIONS 

AS  stated  above,  the  amount  of  money  to  be 
made  from  inventions  depends  upon  mar- 
keting conditions  and  especially  upon  the 
demand  for  inventions.  With  so  many  examples  fur- 
nished by  the  experience  of  enterprising  firms,  there 
is  no  room  today  for  wrong  conceptions  about  market- 
ing problems.  Marketing  means  a  lot  of  money  and 
the  influence  of  men  well  up  in  trade  and  business. 
In  the  natural  order  of  things  inventors  are  usually 
poor  business  men. 

Skill  in  handling  patents  counts  for  more  than  luck. 
Analyzed  carefully,  successful  inventions  have  simply 
been  marketed  right.  The  little  rubber  stopper  with 
the  wire  attached  to  it,  which  is  now  used  on  every 
beer  bottle,  is  a  good  example  of  fine  business  man- 
agement in  the  handling  of  an  apparently  trifling  in- 
vention. Public  demand  for  any  one's  invention 
practically  regulates  its  success  from  a  commercial 
standpoint.  If  there  is  no  public  demand  for  it,  there 
can  be  no  substantial  profit  or  income  from  it,  how- 
ever hard  people  may  crack  their  brains. 

The  first  questions  to  be  considered  in  demand- 
creating  are: 

1.  Is  there  a  demand  for  an  invention  or  its  output? 

2.  Will  the  invention  do  the  work? 

61 


62  Sale  of  Inventions 

3.  Will  it  do  it  better  or  cheaper  than  other  existing 

devices? 

4.  Can  it  be  efficiently  protected? 

Some  inventions  that  do  not  perform  the  work 
required  of  them  when  a  patent  is  strictly  followed,  can 
be  made  to  work. 

Then  there  are  questions  as  to  how  to  market  in- 
ventions. These  are: 

1.  Shall  we  sell  direct  to  the  consumer  by  our  sales- 

men? 

2.  Shall  we  sell  direct  to  the  retailer? 

3.  Shall  we  sell  through  selling  agencies? 

4.  Shall  we  sell  by  mail  direct  to  the  consumer? 

It  is  again  necessary  to  urge  that  the  process  of 
putting  an  article  on  the  market  is  not  as  simple  as 
may  be  imagined.  It  is  necessary  to  create  a  public 
demand  before  the  invention  can  be  sold  on  any  large 
scale,  and  it  is  necessary  to  follow  up  the  demand  by 
supplying  the  article,  otherwise  the  fruit  of  the  effort 
to  get  it  will  be  lost.  The  manner  of  procedure  will 
depend  upon  the  nature  of  the  invention.  After 
figuring  out  carefully  the  net  cost  of  manufacture 
and  fixing  a  reasonable  wholesale  price  which  leaves 
a  margin  of  profit,  the  manufacturer  must  secure 
trial  orders  from  various  concerns.  The  inventor 
must  create  the  market  for  his  product.  He  must 
not  wait  for  the  market  to  be  created  for  him;  other- 
wise he  will  get  nowhere. 

A  very  large  proportion  of  the  really  useful  patents 
is  born  of  the  necessity  of  manufacturers.  They  do 
not  sit  down  and  say,  "  Now  let  us  invent  something"; 
but  forced  by  the  exigencies  of  business  competition, 
which  bring  matters  to  a  crisis,  they  find  themselves, 


The  Demand  for  Inventions  63 

in  order  to  secure  an  advantage  in  their  struggle  for 
the  public's  orders,  compelled  to  devise  means  to 
make  their  machines  or  products  better  than  those 
of  their  rivals.  The  bigger  the  enterprise,  the  more 
foresight  must  be  displayed  in  forestalling  the  market. 
The  biggest  corporations  today  have  their  study 
departments,  their  closed  laboratories,  where  a  mul- 
titude of  inventors  are  studying  fresh  problems  to 
supply  the  future  needs  of  men.  They  say  this  to 
their  own  corps  of  inventors:  "  Don't  wait  for  the 
future  to  make  itself;  mold  it  ahead  of  time.  Don't 
wait  for  the  demand;  have  the  product  that  will  be 
wanted,  ready  in  advance."  Incidentally,  it  explains 
the  attitude  of  mind  of  these  big  men,  who  are  the 
fountain  heads  of  business  enterprise. 

The  following  is  a  good  formula  for  determining  the 
market  for  the  product  of  a  manufacturer:  The  num- 
ber of  possible  customers  times  the  average  sales  to 
average  dealers,  divided  by  the  number  of  manufac- 
turers of  equal  rank,  equals  the  total  normal  quota 
of  sales  of  a  particular  city  for  the  normal  amount  and 
intelligence  of  sales  effort. 

There  are  two  aspects  of  the  question:  (i)  knowl- 
edge of  the  formula  and  (2)  estimate  of  the  factors 
which  will  supply  the  data  and  solve  the  formula. 
To  take  a  concrete  problem.  Suppose  it  is  desired  to 
find  the  number  of  probable  sales  of  gloves  that  manu- 
facturers may  expect  to  make  in  a  given  city.  The 
inventor  will  first  have  to  find  out  the  number  of 
people  in  the  city  who  are  likely  to  be  purchasers  of 
gloves.  This  depends  (i)  on  the  nature  of  the  article 
and  (2)  on  various  conditions  obtaining  in  the  par- 
ticular city. 


64  Sale  of  Inventions 

1.  Nature  of  the  Article. 

A.  Whether  used  by  all  classes  of  people. 

B.  Whether  used  by  a  certain  class. 

C.  How  often  used. 

D.  How  frequently  purchased  —  repeat  orders. 

E.  Whether  it  is  a  necessity  or  a  luxury. 

F.  Whether  there  is  a  special  season  of  use. 
Gloves  as  a  rule  are  not  used  by  all  classes  of  people 

(A),  but  by  well-dressed  people  (B)  who  use  them  more 
or  less  daily  during  business  hours  or  when  making 
social  calls,  in  the  company  of  women,  in  the  evenings, 
on  Sundays,  and  on  special  occasions  (C).  The  aver- 
age user  will  make  one  pair  of  gloves  last  a  season, 
although  others  will  have  several  pairs  of  gloves  for 
various  or  interchangeable  use  (D).  Gloves  will  be 
used  as  an  accompaniment  of  other  clothing  and  so 
as  to  harmonize  therewith,  sometimes  as  a  matter  of 
convenience,  sometimes  as  a  matter  of  actual  ne- 
cessity (E).  They  are  used  mostly  in  the  cool  season, 
infrequently  in  summer  (F). 

2.  Conditions  Affecting  the  Particular  City. 

A.  Population. 

B.  Industrial  or  factory  center. 

C.  Social  center. 

D.  Condition  of  the  working  classes. 

E.  Waterways,  seaport,  etc. 

F.  Cost  and  standards  of  living. 

G.  Number  of  visitors,  transients,  etc. 
H.    Intellectual  center. 

I.    Number  of  office  workers. 
/.    Number  of  professional  people. 
K.    Tone  of  residential  districts. 
L.    Transportation  facilities. 


The  Demand  for  Inventions  65 

M .  Store  service. 

N.  Prosperity  of  merchants. 

0.  Fixed  salary  class. 

If  the  city  is  an  industrial  center  and  factories  are 
plentiful,  making  diversified  articles  (B),  it  will  reflect 
the  prosperity  of  the  different  classes.  Wages  will 
be  fairly  high  and  the  condition  of  the  working  class 
satisfactory  or  at  least  normal  (D).  The  workers  will 
have  money  to  spend,  and  merchants  should  benefit 
thereby  (JV),  as  should  the  professional  men  (/). 
Necessities  would  be  purchased  first,  —  for  the  house, 
etc.,  —  then  things  for  personal  convenience.  This 
item  would  cover  clothing,  gloves  included.  In- 
dustrial prosperity  for  the  city  is  one  of  the  factors 
which  will  influence  social  activities.  Thus  if  the  city 
is  a  social  center  (C),  it  would  react  upon  the  standard 
of  living  of  a  large  class  of  people  residing  in  the  resi- 
dential districts  (K)  whose  needs  would  necessarily 
increase  and  call  for  many  ramifications  in  store  serv- 
ice (M).  The  industrial  prosperity  would  determine 
the  fortunes  of  a  large  class  of  desk  men  or  office  workers 
who  also  have  modest  social  activities,  especially  the 
younger  element  (7),  and  it  would  make  in  favor  of 
the  security  of  fixed  salaries  (0). 

If  the  city  has  good  waterways  and  is  a  seaport, 
with  or  without  good  harbors  and  shipping  facilities, 
this  prosperity  will  be  reflected  by  the  city.  The 
number  of  visitors  arriving  and  leaving  the  city  will 
be  influenced  (G).  If  the  city  is  an  intellectual  center 
(H)>  this  will  also  influence  the  number  of  visitors 
(G),  who  are  usually  well-dressed.  This  condition 
will  also  react  on  the  merchants  and  call  for  better 
store  service  and  facilities,  better  hotel  service,  etc. 


66  Sale  of  Inventions 

It  will  also  affect  the  cost  of  living,  may  increase  the 
number  of  office  workers,  professional  people,  etc., 
and  add  to  the  city's  wealth.  Transportation  facil- 
ities in  general  will  influence  the  price  of  commodities, 
the  number  and  patronage  of  the  stores,  the  influence 
of  the  moneyed  classes,  the  tone  of  the  residential 
district,  the  number  and  efficiency  of  mechanics, 
middlemen,  working  men,  etc.  By  analyzing  possible 
market  factors  in  this  way,  the  complicated  fabric  of 
a  city's  industrial,  social,  and  intellectual  organization 
is  unraveled. 

Coming  back  to  gloves  and  considering  possibili- 
ties and  gauging  susceptibilities  as  outlined  above,  it 
will  be  concluded  that  well-dressed  people  may  be 
found  among  office  workers,  business  men  and  mer- 
chants, and  most  frequently  among  professional  men, 
among  people  of  both  sexes,  prominent  socially,  etc. 
Professional  people,  business  men,  ladies,  etc.,  will 
purchase  more  gloves  than  will  office  workers  or 
workingmen,  as  they  have  more  opportunities  to 
use  them.  After  sizing  up  correctly  as  nearly  as 
possible  the  advantages  any  particular  city  of  a  deter- 
mined population  possesses  in  point  of  trade,  in- 
dustrial, and  intellectual  prestige,  the  next  thing  to 
do  is  estimating  the  possible  total  number  of  pur- 
chasers out  of  the  total  population.  For  this  purpose 
use  may  be  made  of  statistics  of  the  volume  of  trade, 
freight,  transportation  conditions,  ship  movements, 
government  reports,  trade  reports,  trade  papers,  and 
house  organs,  reports  of  commercial  agencies,  travel- 
ing salesmen's  reports,  market  fluctuations,  news- 
paper advertisements,  etc.  Let  us  say  that  a  city 
of  300,000  inhabitants,  having  more  than  a  fair  pro- 


The  Demand  for  Inventions  67 

portion  of  workingmen  and  a  large  number  of  factories, 
will  furnish  a  reputed  16,000  (more  or  less)  customers 
for  gloves  in  a  determined  period  of  time,  varying 
from  six  months  to  a  year. 

It  is  now  necessary  to  know  how  many  manufac- 
turers are  to  supply  the  needs  of  these  customers  in 
the  particular  city  under  consideration.  It  must  be 
considered  that  16,000  represents  only  the  number 
of  persons  who  will  purchase  gloves  and  not  the  total 
number  of  individual  sales  which  will  be  made  by  all 
the  retail  stores  selling  gloves  in  that  particular  city. 
First,  it  must  be  remembered  that  the  approximate 
total  number  of  manufacturers  making  gloves  alone 
or  as  a  side  line  is  to  be  found  out,  and  that  only  a 
certain  percentage  of  these  will  be  doing  business  in 
the  particular  city.  In  the  absence  of  definite  informa- 
tion, these  active  ones  will  be  grouped  into  members 
having  equal  rank.  The  following  items  will  tend 
to  indicate  what  factors  will  determine  the  rank  of 
any  particular  manufacturer: 

What  Determines  Rank. 

A.  The  number  of  traveling  salesmen  employed. 

B.  Amount  of  capital  invested  in  the  enterprise. 

C.  The  activity  of  the  sales  department. 

D.  The  activity  of  coordinate  advertising  depart- 

ment. 

E.  Appropriation  to  push  sales. 

F.  Efficiency  of  packing  department. 

G.  Nearness  to  centers  of  trade  and  transportation 

facilities. 

H.  Regulation  of  the  supply  of  the  product. 
/.    Cheapening  factors  of  production. 
/.    Maintaining  standard  of  excellence  of  the  article. 


68  Sale  of  Inventions 

K.  Labor  market  conditions. 

L.    Conservative  policy  of  management. 

M.  Efficiency  of  office  administration. 

N.  Absence  of  national  or  local  regulations  which 
hamper  effort. 

0.    Receptiveness  of  new  ideas,  plans,  and  policies. 

P.    Corporate  connections. 

Q.  Interests  in  subsidiary  companies  and  firms, 
making  items  essential  to  product. 

R.   Selling  vs.  production  expenses. 

S.    Constancy  of  expected  profits. 

As  a  rule  the  number  of  manufacturers  of  equal 
rank  with  national  sales  organizations  doing  business 
in  any  particular  city  is  more  or  less  known,  but  the 
number  of  others  (less  than  the  total)  may  be  uncertain. 
On  the  other  hand,  the  average  sales  of  gloves  to 
average  dealers,  for  the  period  under  consideration, 
may  be  determined  with  comparative  certainty,  with- 
out knowing  the  total  number  of  stores  to  be  supplied, 
so  that  the  latter  will  be  an  unknown  quantity.  An 
investigation  of  the  average  sales  to  average  dealers 
will  reveal,  let  us  say,  that  150  pairs  of  gloves  are  sold 
to  the  average  dealer  over  and  above  existing  stocks, 
for  the  period  considered.  There  may  be  anywhere 
from  200  to  300  stores  selling  wearing  apparel  and 
articles,  but  how  many  actually  handle  gloves  steadily 
is  not  known.  We  now  have  16,000  possible  cus- 
tomers and,  let  us  say,  40  manufacturers  making 
gloves.  By  the  formula  we  will  express  the  equation 
thus:  40  : 16,000  =  150:  ?  In  other  words,  the  num- 
ber of  possible  customers,  times  the  average  sales  to 
average  dealers,  divided  by  the  number  of  probable 
manufacturers,  gives  the  total  normal  quota  of  sales 


The  Demand  for  Inventions  69 

for  the  city.  This  is  assuming,  however,  that  40 
manufacturers  are  actually  selling  gloves  in  this  city. 
Then  150  gloves,  times  16,000  (by  the  formula), 
divided  by  40,  makes  60,000  pairs  of  gloves,  which 
represents  the  total  amount  sold  in  this  city  for  the 
particular  period.  This  may  not  be  exact,  but  it  is 
a  safe  estimate.  If  300  dealers  sold  equal  numbers 
of  gloves,  of  course  each  dealer  would  sell  200  pairs 
(60,000  —  300).  Now  let  us  suppose  that  two  large 
advertising  and  enterprising  glove  manufacturers  prac- 
tically hold  the  field  to  themselves  and  are  of  equal 
rank,  say  the  firms  of  Meyer  and  Adler.  This  is 
definite.  On  investigation  it  appears  that  they  con- 
trol 75  per  cent  of  the  total  amount  of  sales,  the  balance 
going  to  other  competitors  of  varying  ranks.  Seventy- 
five  per  cent  of  60,000  would  give  45,000  pairs  of  gloves 
or  22,500  pairs  of  gloves  to  each  of  these  competitors 
of  equal  rank.  By  checking  up  on  incomplete  data 
it  is  possible  to  obtain  a  satisfactory  basis  of  computa- 
tion of  volume  of  sales  of  a  manufacturer's  product 
in  accordance  with  the  laws  of  probabilities  stated 
by  the  formula.  The  following  factors,  in  one  way 
or  another,  have  to  determine  the  total  normal  quota 
of  sales  in  any  city. 
Total  Normal  Quota  of  Sales. 

A.  Number  of  stores  selling  the  article  at  retail. 

B.  Number  of  sizes,  styles,  and  shapes  of  article. 

C.  Number  of  special  brands,  which  sell  well. 

D.  Amount  of  stock  on  hand. 

E.  Number  of  repeat  orders. 

F.  Quantity  of  gloves  produced  at  one  time. 

G.  Number  of  exchanges. 
H.   Jobbers'  supplies. 


70  Sale  of  Inventions 

I.    Special  cut-price  sales. 

J.    Movement  of  trade  in  vicinity. 

K.    Location  of  stores. 

L.    Amount  of  space  for  goods. 

M .    Character  of  window  display. 

2V.    Special  occasion  sales. 

0.    Amount  of  advertising. 

P.    Special  discount  if  purchasing. 

Q.  Number  and  influence  of  salesmen. 

R.   Movement  of  other  stocks. 

S.  Delivery  facilities. 

T.   Credit  department  and  family  accounts. 

U.  Amount  of  credit  in  banks. 

V.  Volume  of  general  business. 

W.  New  or  side  line. 

X.  Profit  or  loss  on  periodic  sales. 

F.  Promptness  in  replenishing  depleted  stocks. 

In  its  most  specific  aspect  the  question  of  demand 
for  any  given  invention  concerns  the  interest  of  the 
consumer,  dealer,  manufacturer,  and  inventor  in  the 
order  named.  The  inventor  comes  last.  It  matters 
not  a  straw  what  the  popular  belief  may  be.  If  the 
consumer  will  not  buy,  the  dealer,  whether  retailer  or 
wholesaler,  will  not  buy,  and  if  they  do  not  buy, 
the  manufacturer  will  not  make  the  patented  article, 
and  the  inventor  will  derive  no  advantage  therefrom. 

A  brainy  producer  of  a  good  article  believes  rightly 
that  the  ultimate  result  of  his  efforts  is  the  opinion 
the  consumer,  not  the  dealer,  places  on  his  goods. 
The  consumer  demands  that  certain  attributes, 
which  are  deemed  essential  by  him,  be  included  in 
all  products,  and  the  manufacturer  who  refuses  to 
fulfill  the  demand  under  these  conditions,  even  though 


The  Demand  for  Inventions  71 

he  furnishes  what  he  deems  to  be  an  improvement, 
without  first  determining  how  his  product  will  be 
received,  is  taking  a  chance  with  fate.  The  public 
are  not  fools,  notwithstanding  Barnum's  well-known 
remark;  they  are  pretty  smart.  If  a  man  wants  to 
sell  goods  to  the  public,  he  will  find  out  they  know 
a  great  deal  about  them.  The  hardware  people,  the 
drug  concerns,  and  other  business  firms,  all  have 
their  meetings.  The  price-cutting  dealer  begins  his 
work  the  moment  the  consumers  have  "  cut  the  ice  " 
and  boosted  the  patented  article  so  that  the  dealer 
derives  a  constant  patronage  and  reputation  for  the 
article.  The  price-cutter  always  selects  the  article 
which  has  a  reputation  at  a  certain  price.  If  the 
article  had  not  been  universally  sold  at  the  certain 
price  and  were  not  reputed  to  be  worth  the  price, 
it  would  not  be  worth  his  while  to  cut  it.  The  article 
could  never  become  a  drug  on  the  market. 

The  dealers  will  insist  upon  a  steady  source  of  supply 
of  a  patented  article  upon  which  the  consumer  has 
bestowed  his  patronage.  They  will  not  take  it  up  to 
sell  unless  they  are  assured  of  a  reasonable  certainty  of 
supply,  for  to  do  so  would  not  only  occasion  expense  in 
suddenly  changing  over  from  their  former  system  of 
business,  but  would  also  subject  them  to  disastrous 
losses  in  case  they  create  a  new  demand  with  their 
customers  which  they  subsequently  find  it  impossible 
to  fill.  To  create  a  necessity  for  an  article  is  a  big  task. 
With  some  inventions,  like  typewriters  and  auto- 
mobiles, it  takes  years,  large  sums  of  money  and  con- 
siderable pushing,  before  they  can  be  considered 
staple  articles  on  the  market.  Then  again,  a  large 
number  of  unforeseen  experiments  must  be  made 


72  Sale  of  Inventions 

after  a  device  is  once  launched  —  changes  and  modi- 
fications are  necessary  —  and  these  cost  money.  One 
must  take  this  in  consideration  and  provide  for  it. 
The  consequences  of  ignorance  in  omitting  any  detail 
may  mean  a  failure  of  the  entire  undertaking.  An 
invention  does  not  always  succeed  in  proportion  to 
its  merit;  it  may  fail  because  of  poor  management. 

The  dealers  realize  that  they  are  the  channels  of 
distribution  and  expect  a  reasonable  profit  from  manu- 
facturers. This  is  the  ground  for  attempts  at  price 
fixing  on  the  part  of  the  manufacturer.  The  United 
States  Supreme  Court,  the  highest  tribunal  in  the 
land,  has  condemned  almost  all  instances  of  price 
maintenance,  whether  accomplished  by  contract  or 
licenses  under  patents  or  copyrights.  The  courts  at 
present  regard  unrestrained  competition  as  a  business 
necessity.  Only  comparatively  recently  have  people 
thought  otherwise.  The  courts  have  repeatedly  de- 
clared it  unlawful  for  trade  associates  to  publish  lists 
containing  the  names  of  aggressive  price-cutters. 
The  direct  contract  plan  has  also  been  discountenanced. 
By  virtue  of  this  the  jobber  agreed,  in  consideration 
of  being  supplied  with  the  producer's  goods,  to  sell 
only  at  certain  prices  and  only  to  such  retail  dealers 
as  were  designated  by  the  producer,  who  required 
the  retailers  who  made  these  contracts  to  maintain 
a  standard  retail  price.  So  there  is  nothing  to  hope 
for  in  the  way  of  protection  by  direct  sale  contract. 

If  legal  enforcement  of  price-maintained  contracts 
is  desired  instead  of  the  more  effective  way,  which 
consists  in  educating  the  consumer  to  demand  articles 
of  known  quantity  and  fixed  price,  it  should  be  by 
way  of  straight  agency  or  consignment  of  goods  for 


The  Demand  for  Inventions  73 

sale  where  the  title  to  the  goods  still  remains  with 
the  seller  or  consignor.  A  direct  sale  is  tabooed. 
It  is  encouraging  to  note  that  in  New  Jersey  a  statute 
has  been  passed  which  is  broad  enough  to  forbid 
price  cutting.  It  is  doing  a  great  deal  of  good.  Let 
us  hope  that  other  jurisdictions  will  follow  suit. 

The  demand  being  good  and  the  dealer  realizing 
the  demand,  the  manufacturer  is  kept  busy  producing 
the  article  in  quantities  large  enough  to  meet  the 
demand.  The  manufacturer's  problem  is  to  gauge 
the  public  demand  in  the  first  place  so  as  to  make 
the  article  right.  Competition  will  hit  the  manu- 
facturer of  a  patented  article  harder  than  it  will  the 
dealer  who,  finding  no  demand,  ceases  to  order,  while 
the  manufacturer  may  be  well  stocked  with  patented 
goods  he  cannot  sell.  Competition  is  always  present 
and  is  a  good  thing  in  trade.  It  helps  to  produce 
a  good  article.  True  competition  exists  where  one 
manufacturer  is  striving  against  another  manufacturer 
to  put  the  best  article  out  for  the  least  money;  for  if 
one  dealer  has  a  good  article,  he  compells  all  other 
dealers  to  put  out  a  first-class  article  of  the  same 
kind  in  order  to  meet  competition.  If  they  don't, 
they  cannot  sell  the  goods  he  does. 

The  manufacturer  properly  considers  that  inventor 
ignorant  who  knows  nothing  about  market  conditions. 
When  an  invention  is  offered  by  an  inventor  belong- 
ing to  this  category,  the  manufacturer  will  display 
no  interest.  Among  manufacturers  who  seem  likely 
prospects  for  an  inventor,  are  some  who  try  to  take 
up  much  of  his  time  without  meaning  to  do  busi- 
ness. With  them  he  can  accomplish  nothing.  He 
must  find  a  way  to  avoid  these  and  devote  more 


74  Sale  of  Inventions 

time  to  better  prospects.  But  the  experience  a  manu- 
facturer has  had,  makes  him  a  good  judge  of  the  sal- 
ability  of  an  invention.  The  maker  of  articles  also 
knows  what  position  he  stands  in  when  it  comes  to 
creating  a  source  of  profit  for  dealers  and  distributors, 
and  he  is  on  the  lookout  for  patented  articles  that  will 
sell  well.  Industrial  competition  is  a  form  of  war. 

The  inventor  will  now  understand  that  he  is  in  a 
position  to  demand  adequate  compensation  for  any 
patented  article  which  the  manufacturer  will  begin 
to  make  because  of  the  demand  existing  therefor  on 
the  part  of  the  consumer  and  of  the  distributor.  He 
should  recognize  that  he,  the  inventor,  is  the  cause 
of  it  all.  If  there  is  likely  to  be  a  large  and  steady 
demand,  once  the  manufacturer  and  inventor  have 
ascertained  this  fact  and  the  inventor  has  several 
propositions  up  his  sleeve  for  disposing  of  his  inven- 
tion, a  small,  steady  royalty  would  be  the  best  mode 
of  compensation. 

If  the  inventor  has  more  than  one  opportunity  of 
placing  an  invention,  he  should  give  special  con- 
sideration to  the  subject  before  deciding  which  prop- 
osition he  will  accept.  He  should  bear  in  mind  that 
sometimes  the  largest  royalty  offered  may  not  be  to 
his  ultimate  good.  Consideration  of  the  question  from 
an  investment  standpoint  will  bring  out  the  principle. 

If  the  inventor  considered  investing  his  savings, 
he  would  place  them  where  he  would  be  sure  of  a 
continued  payment  of  interest,  even  though  the 
dividend  were  small,  rather  than  in  some  investment 
which  offered  larger  returns  with  a  doubt  attached 
as  to  their  continuing  at  the  same  rate.  A  small 
royalty  offered  by  a  large  and  strong  concern  is  safer 


The  Demand  for  Inventions  75 

than  a  larger  one  based  on  hopes  and  promises  of  a 
party  or  firm  that  is  not  on  a  sound  business  basis. 
Competition  and  the  possible  volume  of  business  have 
an  important  bearing  on  royalty.  Close  competition 
reduces  the  possibility  of  granting  large  royalties. 
A  large  volume  of  business  works  in  the  same  direction. 
On  the  other  hand,  restricted  sales  at  large  profits 
should  operate  to  the  advantage  of  the  inventor. 
The  amount  of  capital  necessary  to  produce  and  market 
an  invention  also  has  its  influence.  The  greater  the 
investment,  the  greater  the  risk  of  the  manufacturer. 
The  inventor  is  expected  to  bear  a  portion  of  this 
risk  and  burden  expressed  in  reduced  royalties. 

The  inventor  must  see  to  it  that  the  patented  article 
is  always  kept  up  to  its  standard  of  excellence,  con- 
sidered from  the  standpoint  of  the  buyer's  expecta- 
tions. The  manufacturer  must  produce  the  article 
patented  in  a  condition  acceptable  to  the  ultimate 
consumer.  More  than  one  article  has  met  the  test 
of  acceptability  only  to  fail  as  a  money-maker  when 
subjected  to  the  test  of  creating  net  profits.  In 
such  event  the  public  will  not  have  the  opportunity 
of  purchasing  a  product,  however  well  it  may  meet 
the  demand,  unless  there  is  a  sufficient  margin  of 
profit  between  the  true  cost  and  the  selling  price.  That 
is  the  only  way  to  prevent  the  patented  article  already 
on  the  market  from  being  crowded  out  by  better 
articles.  Sometimes  it  is  a  good  policy  for  an  in- 
ventor to  make  improvements  in  his  invention  after 
he  is  working  his  first  patent.  This  will  be  necessary 
in  order  to  keep  out  others  from  making  these  same 
improvements  and  so  supplant  the  inventor  in  the 
good  graces  of  the  buying  public. 


76  Sale  of  Inventions 

There  are  some  places  where  inventors  are  so  num- 
erous that  manufacturing  industries  prevail  locally. 
The  little  state  of  Connecticut,  for  instance,  takes 
out  more  patents  than  all  the  southern  states  together. 
Therefore  always  consider  tHe  trade  zone.  Many 
businesses  find  it  impractical  to  attempt  to  win  trade 
outside  of  certain  zones  and  districts.  For  example, 
a  manufacturer  of  stoves  has  little  if  any  market  for 
his  product  in  California.  Consider  also  trade  days. 
There  is  not  a  town  of  one  thousand  inhabitants  in 
the  country  where  they  do  not  have  specific  trade 
days,  and  on  those  days  the  dealers  will  sell  many 
articles  for  cost  in  order  to  stimulate  sales  on  other 
articles.  These  and  other  conditions  make  in  favor 
of  sales  and  demand-boosting  for  an  article  of  merit. 


CHAPTER  IX 
THE  MARKET  FOR  INVENTIONS 

CREATING  a  demand  has  to  do  particularly 
with  the  selling  end  of  the  patented  article. 
Creating  a  market,  again,  has  to  do  with  the 
feature  of  mechanical  developing  as  well  as  selling 
this  article.  This  is  a  practical  difference.  It  will 
be  found  that  the  term  "  market "  presupposes  the 
existence  of  many  mixed  factors.  These  must  all 
be  considered  separately.  The  particular  and  funda- 
mental concern  in  demand  creation  is  consumption, 
while  the  leading  feature  in  market  controlling  is  « 
cost.  When  a  manufacturer  of  an  article  first  puts 
his  goods  out  as  an  experiment,  he  does  not  know 
whether  or  not  he  is  going  to  make  money.  He  may 
spend  fifty  thousand  dollars  or  he  may  spend  five 
hundred  thousand  dollars  in  supplying  these  articles 
and  still  make  no  money.  This  may  be  due  to  the 
fact  that  the  article  is  not  good  enough  for  the  public. 
In  other  words,  the  producer  may  go  up  like  a  rocket 
and  come  down  like  a  stick. 

Different  factories  have  a  different  cost  for  one 
and  the  same  article,  and  the  market  they  secure  is 
consequently  affected.  The  important  item  of  over- 
head factory  expense  shuts  out  all  other  factors  in 
the  estimation  of  cost  and  the  fixing  of  price.  As 
was  aptly  remarked  by  Thompson  in  his  able  work 
on  patents,  and  in  an  eminent  article  on  factory 

77 


78  Sale  of  Inventions 

conditions  affecting  patent  conditions,  "  a  study  of  the 
mechanical  methods  utilized  by  a  competitor  in  his 
manufacturing,  as  indicated  by  his  product,  is  more 
important  than  studying  his  selling  methods.  ..." 
It  is  also  necessary  to  make  a  list  of  the  comparative 
times  necessary  to  assemble  the  parts  of  the  new  article. 
Owing  to  the  constantly  increasing  cost  of  manu- 
facture, this  item  is  very  important.  "  Remember 
that  a  deviation  in  order  to  meet  a  changed  selling 
policy  of  a  competitor  is  a  mere  detail,  whereas  a  change 
in  construction  to  come  within  a  lower  cost,  discovered 
inherent  in  the  competitive  goods,  after  a  product 
is  placed  on  the  market,  is  often  prohibitive,  owing 
to  the  expense  involved  in  making  changes." 

One  manufacturer  found  no  profits  in  running  his 
business  where  his  cost  of  selling  goods,  which  were 
new  to  the  public  and  had  to  be  extensively  pushed, 
was  fifteen  per  cent.  While  the  creation  of  a  really 
meritorious  invention  involves  much  ingenuity  on 
the  part  of  the  inventor,  the  successful  vending  of 
that  invention  often  involves  ingenuity  of  even  a  higher 
degree.  The  personnel  necessary  to  make  any  in- 
vention successful  includes  not  only  the  inventor 
but  the  jobber  and  dealer  in  the  world's  market  as 
well.  Between  them  it  is  a  triangular  deal.  The 
jobbers  and  dealers  are  the  salesmen  of  the  inventor; 
they  are  part  of  the  mechanism  the  inventor  must 
use  to  introduce  the  goods,  educate  the  public,  and 
create  a  demand.  These  jobbers  and  dealers  trade 
in  goods  the  great  majority  of  which  are  not  patented. 
They  are  free  goods,  and  the  public  has  been  edu- 
cated as  to  their  value.  The  demand  for  them  is 
large  and  the  profits  are  not  great,  but  as  a  rule  sufn- 


The  Market  for  Inventions  79 

cient.  Competition  has  been  fought  to  a  finish;  all 
know  what  it  means  to  cut  prices.  The  maker  knows 
that  if  he  sells  to  several  dealers  in  one  place  and 
one  cuts  the  price  almost  to  cost,  the  other  dealers 
will  "  block  the  line."  Profit  now  is  so  small  as  to 
become  a  mathematical  point.  Then  the  public 
always  expects  to  buy  at  this  ridiculously  low  price. 
As  a  result  the  manufacturer  will  no  longer  sell  to  this 
cut-rate  making  dealer,  and  the  other  dealers  won't 
buy.  As  the  manufacturer  cannot  afford  to  sell  at 
the  cut-rate  price,  he  gets  no  more  sales.  Hence 
the  better  policy  is  to  put  a  moderate  profit  on 
each  article,  and  by  large  sales  develop  returns.  In 
this  way  a  producer  can  effectively  husband  his 
resources. 

Whenever  we  think  of  the  market,  we  think  in 
terms  of  competition.  It  must  always  be  considered. 
It  is  what  stimulates  invention.  As  a  result  of  this 
competition  a  superior  article  is  evolved  and  placed 
on  the  market.  A  manufacturer  must  make  the 
most  up-to-date  article  that  he  can  for  fear  that  his 
competitor  will  discover  something  that  is  equally 
good  or  better  that  does  not  come  under  his 
patent.  Competition  is  the  coping  stone  of  business 
prosperity. 

The  proper  time  for  the  inventor  to  think  of  the 
market  is  not  after  he  has  obtained  the  patent  but 
right  from  the  very  beginning  when  he  applies  for  a 
patent.  The  matter  must  be  resolved  beforehand. 
Before  filing  an  application,  it  is  well  to  have  a  com- 
mercial investigation  made  to  discover  all  products 
of  similar  nature  which  have  been  made  in  the  past, 
and  are  being  made  at  the  time  of  the  invention. 


8o  Sale  of  Inventions 

This  may  enable  one  to  test  one's  construction  after 
making  the  comparison.  In  finding  the  market, 
there  is  an  element  of  psychology  present  as  to  how 
the  patentee  is  going  to  reach  the  kind  of  people  that 
will  buy  his  article,  how  he  can  approach  them,  how 
he  can  get  them  to  pay  a  proper  price.  If  he  does 
not  succeed,  the  invention  will  be  stillborn,  and  he 
will  have  nothing  to  fall  back  on. 

Above  everything  else  comes  the  cost  of  introducing 
an  article  into  the  market.  Things  are  easy  after  a 
market  has  been  obtained.  The  question  is,  How 
much  effort,  time,  and  money  will  it  cost  to  secure 
this  market? 

This  is  a  matter  which  cannot  be  determined  be- 
forehand. The  cost  of  starting  works,  if  they  are 
necessary,  or  of  fitting  up  machinery  for  manufactur- 
ing, or  of  altering  such  already  fitted  and  similar 
charges  incidental  to  production  must  be  estimated. 
Next  the  cost  of  diffusion  of  knowledge  of  the  inven- 
tion or  production  to  the  ultimate  buyers  or  con- 
sumers, officers,  travelers'  expenses,  advertising,  and 
salaries  of  officials  enter  into  consideration,  these 
being  all  the  necessary  expenses  of  manufacture  which 
must  be  borne  by  the  selling  price  of  the  product. 
They  represent  money  going  out,  whether  the  inventor 
engages  in  the  business  personally  or  seeks  others 
to  do  so  under  license  from  him.  On  the  question  of 
price  it  is  necessary  to  figure  first  the  cost  of  the  com- 
modity. After  taking  that  into  consideration,  one 
must  figure  the  reasonable  profit  that  the  retailer 
should  make  and  then  figure  one's  prices  from  that 
end  and  figure  them  as  low  as  one  possibly  can  so  as 
to  keep  one's  head  above  water. 


The  Market  for  Inventions  81 

The  fluctuation  of  wholesale  and  retail  prices  in  the 
market  is  a  matter  which  cannot  be  foreseen.  It  will 
serve  as  a  guide  to  mention  that 

5f£  articles,  retail,  cost  35  to  4Off  per  dozen  wholesale. 
10^  articles,  retail,  cost  60  to  90^  per  dozen  wholesale, 
articles,  retail,  cost  $1.75   to  $2.25  per  dozen 

wholesale, 
articles,  retail,  cost  $3.50  to  $4.50  per  dozen 

wholesale. 
$1.00  articles,  retail,  cost  $7.50  to  $9.00  per  dozen 

wholesale. 

The  gross  prices  are  approximately  as  follows: 
On  a  5f5  article,  $4.40  to  $4.80  per  gross. 
On  a  iof$  article,  7.20  to  9.80  per  gross. 
On  a  25^  article,  21.00  to  27.00  per  gross. 
On  a  50^  article,  42.00  to  54.00  per  gross. 
On  a  $1.00  article,  90.00  to  108.00  per  gross. 

It  is  usually  customary  to  give  a  discount  of  from 
five  to  ten  per  cent  if  ordered  in  gross  lots.  Terms  of 
settlement  show  considerable  variation  in  different 
lines  and  range  anywhere  from  one  to  eight  per  cent 
for  cash  in  ten  days  with  extension  of  credit  from  thirty 
days  net  to  ninety  days  "  extra  dating." 

The  mere  invention  of  merchandise  is  ordinarily 
almost  a  minor  consideration  when  put  up  against 
the  selling  and  marketing  of  merchandise.  There 
are  thousands  of  inventions  in  this  country  which 
are  very  valuable  indeed,  but  which  are  never  com- 
mercial possibilities  because  of  the  selling  problems 
involved.  We  have  seen  that  it  depends  virtually 
upon  the  consumer  to  create  a  demand  for  a  patented 
article;  in  fixing  the  price  at  which  the  article  must 
sell,  regard  must  be  had  to  the  price  it  is  fair  for  the 


82  Sale  of  Inventions 

consumer  to  pay.  It  is  easier  to  induce  the  con- 
sumer to  pay  a  higher  price  than  the  dealer,  and  once 
the  consumer  desires  an  article,  the  dealer  will  be 
compelled  to  stock  it. 

If  an  invention  actually  possesses  superior  merit, 
there  is  no  necessity  for  figuring  excess  profits.  A 
good  run  of  purchases  is  assured,  and  things  take  a 
favorable  turn.  Some  manufacturers  of  meritorious 
articles  "  cash  in  "  on  the  market  by  taking  advantage 
of  the  steady  sale  of  their  article.  Daniel  Kops, 
maker  of  the  celebrated  "  Nemo  "  corsets  and  the 
inventor  of  many  patented  improvements  in  the 
corsets  for  which  his  concern  is  famous,  stated  that 
he  did  not  charge  the  public  an  extra  cent  for  his 
inventions.  His  cost  calculations  consider  only  ma- 
terials, labor,  and  overhead  charges.  The  advantage 
of  holding  the  market  by  a  superior  grade  of  corset 
accounts  for  this. 

There  are  not  over  twelve  thousand  retail  stores 
of  any  importance  in  this  country.  Many  things 
invented  are  of  a  nature  demanding  an  outlet  through 
the  stores  of  the  country  in  order  to  be  commercially 
successful  and  in  order  that  they  may  be  placed  con- 
veniently before  the  public  so  that  people  may  have 
the  largest  opportunity  to  avail  themselves  of  the 
improved  device,  whatever  it  may  be.  A  merchant 
can  determine  his  percentage  of  profits  only  when  he 
counts  up  sales,  and  it  is  through  a  host  of  dealers 
that  he  can  do  so. 

There  are  certain  factors  which  enable  a  manu- 
facturer to  hold  the  market  once  it  is  obtained.  Ex- 
tensive advertising  counts.  It  helps  to  fix  the  price 
of  a  good  commodity.  Every  woman  who  goes  into 


The  Market  for  Inventions  83 

a  store  is  thoroughly  enlightened  upon  the  cost  value 
of,  say,  the  Bissell  carpet  sweeper.  This  is  where 
she,  the  consumer,  is  protected  by  the  fixed  price. 
The  good-will  created  for  a  business  also  counts.  It  is 
the  experience  of  a  large  number  of  firms,  manu- 
facturing patented  articles,  that  an  established  trade 
in  a  patented  article  will  continue  to  be  profitable 
for  some  time  after  the  patent  expires.  With  many 
enterprises  it  is  necessary  not  to  stop  with  the  ac- 
quisition of  a  single  patent  or  invention.  It  is  nec- 
essary to  acquire  quite  a  few  patents.  It  means 
protection  against  competition  and  keeping  up  the 
standard  of  excellence  of  patented  goods.  When 
thinking  of  causes  for  deduction  in  estimating  the 
value  of  inventions,  one  must  not  forget  that  the 
employment  of  the  invention  may  entail  infringement 
of  previously  existing  patent  rights  the  acquisition 
of  which  will  be  necessary  for  industrial  protection. 
Any  royalty  paid  must,  of  course,  be  deducted  in 
estimating  the  cost  and  value  of  a  new  patent.  It  is 
necessary  to  mark  out  a  course  and  to  go  right  after 
trade  all  the  time.  This  can  be  done  through  sales- 
men or  through  sales  letters.  The  latter  are  to  be 
preferred.  The  average  man  has  no  faith  in  testi- 
monials unless  it  gives  proof  of  the  statements  made. 
A  well-written  sales  letter  is  the  equal  of  the  salesman 
at  any  time,  and  it  has  the  added  advantage  of  getting 
in  when  and  where  the  average  salesman  cannot. 
The  salesman  has  only  one  opportunity  to  give 
his  talk,  while  the  letter  has  many;  the  salesman 
finds  the  prospect  gone  under  press  of  business,  while 
the  letter  can  afford  to  wait  until  he  returns;  the 
salesman  makes  but  one  single  impression  which 


84  Sale  of  Inventions 

grows  weaker  as  time  passes,  but  the  letter  continues 
to  influence,  gaining  momentum  as  the  days  go  by. 
Over  $106,000,000  is  spent  every  year  in  direct  mail 
advertising,  and  this  includes  letters.  Advertising 
has  overcome  insuperable  obstacles.  The  retail  dealers 
of  this  country  in  all  lines  spend  through  the  pages 
of  their  local  papers  millions  of  dollars  in  advertis- 
ing, much  more  money  than  is  spent  by  national 
advertisers. 

After  much  thought,  labor,  and  experiment  the 
manufacturer  will  arrive  at  a  satisfactory  price  for 
the  new  patented  article.  After  more  labor  and 
large  funds  expended  for  correct  methods  of  merchan- 
dising, dealer  service  will  have  been  established.  The 
dealers  are  now  supplied  and  are  doing  a  good  service. 
Now  comes  the  iniquitous  price-cutter,  the  bane  of 
legitimate  profits.  Price-cutting  should  be  curtailed 
until  it  is  harmless.  The  price-cutter,  as  we  have 
seen,  reasons  that  if  he  advertises  a  well-known 
patented  article  that  sells  regularly  at  $3.00,  for 
$2.00  or  $2.25,  the  public  is  likely  to  give  him  credit 
for  selling  all  other  commodities  at  equally  reduced 
prices;  here  is  where  he  counts  upon  benefits.  It  is 
known  that  price-cutting  has  driven  from  the  market 
many  an  article  of  the  highest  merit.  It  is  evident 
that  if  the  manufacturer  of  a  patented  article  does 
not  fix  the  price  on  his  commodity  and  if  dealers  are 
permitted  to  cut  it,  the  final  outcome  will  be  the 
selling  of  goods  at  such  low  prices  as  to  destroy  all 
profits  for  the  legitimate  dealer.  He  will  never  be 
able  to  weather  the  storm.  Price-cutting  especially 
concerns  itself  with  new,  superior  articles,  because 
their  merit  means  a  steady  demand  and  the  price- 


The  Market  for  Inventions  85 

cutter  destroys  the  profit  end  of  the  new  article  for 
the  maker. 

It  is  more  important  to  hold  business  after  it  is 
once  obtained  than  to  merely  get  new  business.  Price 
maintenance  is  one  way.  Sales  may  also  be  stimu- 
lated in  new  articles  by  issuing  trade  coupons.  Some 
firms  have  obtained  conspicuous  success  in  intro- 
ducing new  products  by  the  distribution  of  coupons, 
sometimes  in  connection  with  a  sampling  campaign. 
Great  care  should  be  taken  to  see  that  these  coupons 
get  into  the  hands  of  the  actual  prospects. 

A  chain  is  no  stronger  than  its  weakest  link;  there- 
fore a  business  firm  manufacturing  patented  goods, 
that  has  no  market  for  surplus  goods,  cannot  survive 
in  times  of  emergency.  A  patented  article  is  good 
the  world  over,  and  if  there  is  a  local  or  national  market 
for  it,  there  must  surely  be  a  foreign  market  for  it. 
Even  if  the  home  market  be  disturbed,  there  is  no 
reason  why  the  foreign  trade  in  the  article  may  not 
be  brisk.  What  an  increased  foreign  trade  means 
to  the  manufacturer,  to  the  farmer,  to  the  railroad, 
to  the  merchant,  and  to  shipping  is  often  underesti- 
mated or  entirely  unappreciated.  Thus,  upon  the 
outbreak  of  the  European  war  the  price  of  cotton 
declined  enormously,  to  a  point  almost  below  the 
bare  cost  of  production,  and  thousands  of  planters  in 
one  entire  section  of  our  country  found  themselves 
not  only  deprived  of  their  profits  but  actually  facing 
financial  ruin.  Merchants  and  banks  that  had  ex- 
tended credits  to  the  cotton  growers  were  confronted 
by  an  equally  serious  condition.  The  whole  situation 
had  been  brought  about  merely  because  a  part  of  the 
European  market  for  cotton  had  suddenly  been  cut 


86  Sale  of  Inventions 

off.  Finally  men  got  together  and  adopted  measures 
for  bettering  the  foreign  markets  for  offensive  and 
defensive  purposes. 

That  is  one  example.  During  the  same  period  the 
wheat-producing  belt  of  the  country  found  itself  in 
the  midst  of  unprecedented  prosperity.  In  spite  of 
the  fact  that  a  bumper  crop  —  the  largest  in  the 
history  of  the  United  States  —  had  been  harvested, 
prices  went  to  levels  hitherto  unknown.  This  was 
because  some  of  the  great  wheat-producing  sections 
of  the  world  had  suddenly  been  cut  off  from  their 
usual  markets  in  western  Europe  and  the  demand 
for  American  products  had  increased. 

The  western  farmer,  the  grower  of  wheat,  the  mer- 
chant, and  the  banker  in  that  part  of  the  country, 
found  out  as  never  before  how  important  foreign  trade 
was  to  them. 

To  the  manufacturer,  however,  foreign  trade  means 
something  more  than  an  increased  demand  for  his 
products.  There  are  few  factories  in  the  United 
States  that  are  producing  anything  like  full  capacity. 
The  average  factory  is  probably  producing,  in  normal 
times,  at  not  more  than  seventy-five  per  cent  capacity. 
If  the  manufacturer  could  find  a  steady  and  reliable 
outlet  for  this  additional  twenty-five  per  cent  capacity, 
he  would  be  able  not  only  to  increase  his  profits 
greatly,  but  to  reduce  his  overhead  considerably. 
It  would  enable  him  to  sell  his  products  at  a  lower  price 
in  foreign  markets  or  perhaps  both  at  home  and  abroad. 
It  would  give  him  a  good  foothold  on  the  market. 

By  enlarging  the  market  the  manufacturer  is  enabled 
to  maintain  a  steady  demand.  It  should  be  recognized 
that  a  widely  distributed  foreign  trade  means  greater 


The  Market  for  Inventions  87 

average  stability.  In  most  countries  of  the  world  pros- 
perity or  depression  depends  to  a  considerable  extent 
upon  agriculture  and  the  state  of  the  market  for 
agricultural  products.  But  it  is  also  true  of  every 
line  of  manufacturing.  Suppose  that  a  manufacturer 
of  agricultural  machinery  marketed  his  goods  only  in 
the  United  States.  If  there  were  a  single  bad  year, 
when  crops  were  not  good  and  market  conditions  were 
not  favorable,  he  would  probably  find  his  outlet  for 
agricultural  machinery  considerably  curtailed.  Again, 
suppose  that  manufacturer  sold  his  machinery  not 
only  in  the  United  States  but  in  Canada,  South  America, 
South  Africa,  Australia,  India,  Russia,  etc.  It  would 
be  quite  unlikely  that  there  would  be  bad  harvests, 
bad  crops,  or  bad  market  conditions  in  every  country 
in  the  world,  and  perhaps,  while  the  United  States  was 
experiencing  a  depression,  Argentina  or  Russia  would 
be  enjoying  prosperity.  It  is  a  case  of  not  putting 
all  one's  eggs  in  one  basket. 

Patented  articles  will  reach  a  high  level  of  sale  and 
distribution  after  the  present  war,  both  at  home  and 
abroad.  But  this  country  will  rise  to  the  occasion 
amidst  the  fiercest  competition  for  international 
trade.  After  the  war  Europe  will  have  to  retrench. 
She  will  be  loaded  with  tremendous  war  debts,  and 
this  will  mean  increased  taxes,  which  will  bear  heavily 
on  business  and  industry.  Practically  all  of  the  ele- 
ments entering  into  the  cost  of  production  will  be 
raised.  Good-will,  which  means  only  the  advantage 
of  a  going  concern,  is  already  practically  lost  to  many 
of  the  European  belligerent  nations;  the  labor  and 
supervising  force  in  Europe  will  be  considerably 
reduced  and  its  efficiency  materially  impaired.  The 


88  Sale  of  Inventions 

men  who  fought  in  the  armies  of  Europe  are  not  the 
unemployed  or  the  unemployable,  but  are  the  very 
flower  of  the  industrial  and  commercial  enterprises. 
Many  of  these  men  will  not  return  to  their  places  in 
the  factories  or  at  the  bench.  Many  of  those  who 
do  return  will  be  maimed  and  diseased,  while  others 
will  have  lost  the  "  work  spirit "  that  is  such  a  large 
asset  of  the  European  worker.  In  the  meantime 
capital  has  been  withdrawn  from  productive  uses,  and 
all  capital  expenditures  and  capital  investments  have 
been  reduced  in  efficiency.  Capital  will  need  renewals 
and  repairs,  which  have  not  been  made;  therefore  the 
demand  for  capital  will  be  large  at  the  end  of  the  war, 
while  the  amount  of  it  on  hand  will  be  small  and  ex- 
pensive. Interest  rates  will  be  necessarily  high. 
The  elements  entering  into  the  cost  of  production 
will  therefore  be  raised,  and  it  is  pointed  out  that 
prices  cannot,  even  for  a  short  period,  be  substan- 
tially lower  than  the  cost  of  production.  As  a  con- 
sequence of  this,  prices  will  be  high,  higher  than  ever 
before  in  Europe,  and  they  will  approximate  the 
level  of  prices  in  the  United  States  more  nearly 
than  ever  before.  The  European  nations  will  not 
be  able  to  export  to  foreign  markets  and  supply  their 
own  markets  at  prices  as  much  lower  than  ours  as  they 
were  able  to  do  before  the  war,  and  the  American 
firms  should  be  able,  therefore,  to  retain  a  very  large 
proportion  of  our  trade,  holding  a  great  part  of  the 
new  trade  that  we  obtained  during  the  progress  of  the 
war.  This  is  what  appears  to  be  the  outlook  in  Europe 
when  peace  again  prevails. 

European  nations  will  not  be  able  to  do  more  after 
the  war  than  they  did  before.    Domestic  wants  will 


The  Market  for  Inventions  89 

have  to  be  filled  before  the  European  nations  can 
seriously  undertake  foreign  trade.  No  matter  how 
much  they  may  want  it,  no  matter  how  much  they 
may  need  it,  they  will  first  have  to  set  then*  own 
houses  in  order.  The  war  will  be  followed  by  a  period 
of  intense  competition.  As  a  result  the  most  efficient 
producers  and  distributers  will  win. 

After  the  war  everything  will  be  under  tension. 
Scientific  research  and  invention  will  be  carried  on 
in  a  manner  never  before  contemplated.  Already  Eng- 
land, Canada,  and  our  own  country  are  planning  to 
get  a  good  part  of  the  resultant  trade.  The  nations 
will  vie  with  each  other  to  see  which  will  obtain  trade 
supremacy.  During  the  war  this  country  made  a 
great  increase  in  its  exportations  of  manufactured 
goods,  and  there  was  a  noted  decrease  in  importations. 

In  view  of  what  seems  likely  to  come,  manufacturers 
of  new  and  patented  articles  should  protect  then- 
salable  articles  in  foreign  countries  at  the  earliest 
moment.  If  they  fail  to  do  so,  they  will  be  under 
a  marked  handicap  against  powerful  organizations 
existing  to  push  the  sale  of  domestic  articles  made  by 
the  firms  doing  business  in  the  foreign  countries  them- 
selves. A  leading  banker  has  recently  stated  that 
when  peace  comes  a  new  shuffle  of  international  rela- 
tions will  result  because  of  the  new  tariffs  and  trade 
treaties  and  in  view  of  the  existence  of  the  strong 
working  organizations  among  the  industries  in  foreign 
countries.  But  no  matter  how  formidable  these 
organizations  may  be,  patented  articles  may,  if  of 
superior  merit,  oust  their  products  from  a  profitable 
market.  A  distinct  advantage  may  be  gained  by 
obtaining  patent  protection  abroad.  Further,  by 


QO  Sale  of  Inventions 

seeking  patent  protection  on  a  wide  scale  rather  than 
in  the  limited  manufacturing  field,  the  inventor  would 
have  a  certain  definite  control  of  foreign  markets; 
also  by  negotiating  for  the  working  or  sale  of  his  rights 
with  manufacturing  countries,  he  could  protect  him- 
self advantageously  as  to  the  export  of  the  patented 
devices  from  those  countries  or  perhaps  retain  certain 
fields  for  himself.  Thus  he  could  keep  his  home 
factory  fully  occupied  all  the  year  around  in  the 
case  of  those  devices  which  have  a  season  trade  in  the 
United  States,  but  which  other  parts  of  the  world 
would  require  at  a  different  period  of  the  year. 

In  order  to  avoid  making  a  fatal  mistake  in  taking  out 
foreign  patents  many  American  manufacturers  test 
out  an  invention  before  even  applying  for  a  patent 
in  the  United  States.  To  do  this,  however,  the  article 
often  has  to  be  sold,  or  published  in  trade  journals, 
and  this  publication,  at  a  date  prior  to  the  filing  of 
a  foreign,  say  a  French  application,  would  result  in 
the  placing  in  the  hands  of  a  competitor  a  certain 
means  of  defeating  and  defying  the  French  patent 
which  might  be  granted  on  such  an  application.  An 
instance  of  this,  well  known  to  the  rubber  tire  trade, 
came  before  the  courts  of  European  countries  some 
years  ago.  In  this  case  a  full  description  of  the  in- 
vention had  been  given  in  American  trade  journals 
which  reached  foreign  countries  before  the  filing  of 
the  application,  and  when  suit  was  brought  under 
patents  granted  there,  the  defendant  produced  the 
American  journals  and  was  able  to  defeat  the  patent 
and  continue  manufacturing  the  device  which  he  had 
put  on  the  market. 

In  considering  the  profits  to  be  made  in  the  sale 


The  Market  for  Inventions  91 

of  patented  articles  in  the  open,  competitive  market 
it  is  necessary  to  add  that  it  is  easier  to  make  profit 
by  offering  several  articles  to  the  dealer  than  to  ap- 
proach him  with  but  one  line  of  goods.  He  may 
not  be  interested  in  purchasing  some  articles,  but 
he  may  be  interested  in  buying  others.  In  the  end 
this  will  represent  profit.  Generally  to  establish  a 
reputation  on  a  single  article  of  merit  and  then  to 
follow  this  up  with  other  products  is,  everything  con- 
sidered, the  easier  course. 

It  seems  that  the  majority  of  concerns  which  are 
now  selling  groups  of  more  or  less  related  products 
began  with  a  single  product  or  a  single  assortment 
and  added  others  later.  The  Stewart- Warner  Speed- 
ometer Company,  as  its  name  indicates,  began  its 
career  in  the  national  market,  with  a  magnetic  speed- 
ometer. It  now  handles  warning  signals,  tire  pumps, 
vaccuum-feed  systems  for  gasoline,  and  other  auto- 
mobile accessories.  Perhaps  the  most  common  method 
of  introducing  a  new  product  in  a  group  is  through 
the  specialty  salesman  calling  upon  the  trade  and 
taking  actual  orders  which  are  filled  through  the 
jobber.  As  a  rule  the  specialty  salesman  devotes 
his  attention  to  the  new  product  and  does  not  inter- 
fere with  the  work  of  the  regular  sales  force  that 
handles  the  established  brand.  By  adopting  a  conserv- 
ative policy  any  manufacturing  firm  will  be  able  to 
buy  up  good  patents  on  simple  contrivances  that  it 
would  pay  to  make  as  a  regular  or  as  a  side  line.  When- 
ever this  can  be  done  to  advantage  it  should  be  done. 


CHAPTER  X 
PATENTS  AS  PROPERTY 


f  |  ^HE  possession  of  a  patent  does  not  assure,  of 
itself,  financial  independence  to  the  inventor, 
but,  other  things  being  equal,  it  will  make 
money  quicker  when  pnce  on  the  road  to  success 
than  any  other  species  of  property.  Freedom  from 
competition  or  an  exclusive  control  or  monopoly  is 
the  desideratum  of  the  business  world  everywhere. 
The  proper  protection  of  a  new  business  is  of  vital, 
everyday  importance,  and  the  best  protection  is 
universally  recognized  to  be  that  secured  by  means 
of  patents.  Patents  enable  poor  men  to  succeed  where 
everything  else  fails.  Mines  and  oil  wells  are  be- 
coming scarcer  every  year;  there  are  few  which  remain 
undiscovered.  Real  estate  takes  an  inside  knowledge 
of  conditions  which  none  but  men  who  give  the  subject 
deep  study  can  hope  to  acquire.  Taking  all  things 
into  consideration,  patents  are  today  the  greatest 
source  of  wealth. 

However  this  may  be,  the  invention  or  product  of 
the  inventor's  brain  must  be  adequately  protected 
by  letters  patent  in  order  to  give  rise  to  interest  among 
capitalists  and  financial  backers.  Probably  only  those 
who  have  seen  the  great  disadvantage  of  assigning  a 
patent  or  an  interest  therein  or  in  literary  property 
on  a  contract  for  future  payment  can  fully  realize  the 
consequences  thereof.  The  title  to  a  patent  is  not 

92 


Patents  as  Property  93 

to  be  compared  with  the  title  to  real  estate,  because 
a  patent  is  intangible  property  and  therefore  something 
which  creditors  cannot  seize.  Houses  or  farms  may 
be  taken  and  sold  on  mortgage,  but  this  would  not 
be  possible  with  the  species  of  property  characterized 
by  a  patent.  One  could  take  a  mortgage  on  a  patent, 
but  it  is  not  practicable.  The  need  of  the  right  kind 
of  protection  is  paramount  in  order  to  shut  out  com- 
petition. Unless  an  inventor  has  an  exceedingly  in- 
teresting invention,  something  above  the  average, 
he  may  not  awaken  the  interest  of  an  investor.  In 
the  use  of  an  invention  of  ordinary  merit  the  in- 
vestor may  reason:  "  What's  the  use  of  setting  my 
patent  attorney  to  work  looking  up  the  state  of  the 
art  on  this  invention  when  he  is  very  likely  to  rind 
similar  patents  and  possibly  one  that  may  dominate 
it?  I  won't  go  to  the  trouble  and  expense."  Not 
every  good  patent  is  as  "  good  as  gold." 

The  importance  of  stimulating  protection  for  new 
and  meritorious  inventions  is  gaining  ground  every 
day.  It  is  significant  to  note  how  some  of  the  founders 
of  our  country  viewed  patent  protection.  In  1742, 
when  Benjamin  Franklin  invented  the  Franklin  stove 
or,  as  it  was  sometimes  called,  "  the  Pennsylvania 
fireplace,"  he  refused  to  accept  a  patent  on  it  saying: 
"  We  enjoy  great  advantages  from  the  inventions  of 
others,  so  we  should  be  glad  of  an  opportunity  to  serve 
others  by  an  invention  of  ours."  That  may  be  true, 
but  it  did  not  prevent  an  unscrupulous  London  manu- 
facturer from  making  some  slight  changes  on  the 
Franklin  stove,  getting  a  patent  on  it,  and  making 
a  large  fortune  from  its  sales.  This  is  as  true  as  the 
dial  of  the  sun.  Still  Franklin  was  too  shrewd  a 


94  Sale  of  Inventions 

business  man  not  to  know  that  if  a  manager  is  to 
give  his  time  to  the  operation  of  a  business,  a  demand 
for  reasonable  salary  and  compensation  is  fair.  His 
deficiency  was  in  not  recognizing  the  services  of  in- 
ventors as  entitling  them  to  compensation.  Experi- 
ence has  shown  that  the  best  compensation  is  by 
means  of  patents.  This  is  the  only  view  which  squares 
with  the  facts.  Nowadays  people  are  more  enlightened 
in  matters  of  patent  protection.  A  large  number  of 
investors,  acquainted  with  patent  rights,  expect  broad 
patents  on  the  articles  they  are  asked  to  manufacture. 
While  no  person  can  safely  guarantee  a  patent,  as  the 
United  States  Patent  Office  does  not  do  that,  still 
the  inventor,  by  taking  all  the  necessary  safeguards, 
can  fortify  himself  in  the  possession  of  a  good  patent 
by  taking  the  precautions  outlined  in  previous  chapters. 


CHAPTER  XI 
INVENTIONS  AND  INVESTORS 

HAVING  considered  the  factors  outside  the 
merits  of  an  invention  which  determine  the 
success  thereof,  it  will  now  be  convenient 
to  consider  the  details  which  guide  the  inventor  in 
finding,  and  in  closing  with,  investors  interested  in 
or  likely  to  become  interested  in  his  invention. 

It  is  first  of  all  necessary  to  know  what  the  attitude 
of  the  prospective  investor  is  likely  to  be,  so  as  to 
come  armed  with  the  desired  information.  Salesmen 
always  say  that  guessing  the  attitude  of  those  they 
visit  is  the  hardest  part  of  the  game  of  "  landing  the 
prospect  ";  accordingly,  a  few  pointers  on  this  matter 
will  be  welcomed.  The  investor  expects  information 
from  the  inventor  who  wishes  to  dispose  of  his  inven- 
tion either  outright  or  conditionally,  because  the 
probability  is  that  most  of  this  information  will  be 
needed  and,  when  needed,  "  like  the  Texan's  pistol, 
it  is  needed  badly;  in  fact  it  must  be  had." 

The  majority  of  investors  have  neither  the  time 
nor  the  ability  to  make  an  extended  investigation  of 
the  inventor's  proposition;  they  wish  to  get  all  the 
particulars  at  once.  If  one  can  present  these  force- 
fully, one  is  safe  in  assuming  that  the  investors  will 
at  least  consider  any  reasonable  plan.  Every  enter- 
prise should  be  investigated.  The  title  to  a  patent 
is  a  very  important  thing.  Every  real  estate  title 

95 


96  Sale  of  Inventions 

is  carefully  searched  before  any  deed  is  passed.  It 
practically  is  the  same  with  an  invention;  the  title  is 
the  first  thing  that  has  to  be  searched.  Do  not 
hurry  the  investor.  Do  not  burst  like  a  thunderbolt 
upon  him.  Many  inventors  allow  no  time  for  manufac- 
turers to  consider  their  invention  and  the  methods 
by  which  a  novelty  is  to  be  made  to  pay. 

In  order  to  be  at  ease  with  the  investor,  whom  one 
addresses  orally  or  in  writing,  one  must  understand 
certain  features  of  the  investigation  the  investor  will 
want  to  make.  One  should  come  primed  with  vital 
facts.  Ordinarily,  the  investigation  runs  along  general 
lines,  whether  the  plan  will  be  to  sell  an  invention 
outright  or  get  capital  to  start  an  industry  to  work 
the  invention  in  which  one  is  to  obtain  an  important 
interest.  The  incentive  for  purchase  on  the  part  of 
the  investor  is  profit,  and  in  any  event  he  has  to  con- 
front the  market  conditions  already  explained.  So 
some  questions  one  will  be  expected  to  answer  are: 

1.  Is  there  a  sufficient  and  profitable  demand  for 

the  output? 

2.  Will   the   output   be   sufficient   to   supply   the 

demand? 

3.  Is  the  output  of  the  proper  quality  to  meet  the 

demand? 

4.  Can  the  product  be  turned  out  at  a  figure  that 

will  make  operations  profitable? 

5.  Is  competition  to  be  encountered? 

Some  few  enterprises  are  fortunate  enough  to  have 
no  competition.  Usually,  however,  the  competition 
is  more  or  less  severe.  How  much  investigation  is 
necessary  depends  upon  the  number  of  conditions 
which  are  known.  The  question  of  obtaining  a  patent 


Inventions  and  Investors  97 

should  hardly  enter  into  consideration  at  all,  for  it 
is  assumed  that  a  patent  has  already  issued. 

But  should  one  want  to  start  out  in  the  manufacture 
of  an  invention  and  aim  to  obtain  capital,  then  one 
must  be  prepared  to  deal  on  equal  terms  with  the 
investor;  one's  knowledge  should  be  coextensive. 
One  must  be  able  to  talk  or  find  some  one  who  is  able 
to  talk  effectively,  as  most  likely  the  investor  will 
want  to  talk  to  the  inventor  personally  or  to  his  rep- 
resentative. The  investor  will  be  throwing  out  hints 
on  a  variety  of  subjects  like  location,  rents,  fixtures, 
amount  of  equipment,  advertising,  buying,  selling,  col- 
lections, bookkeeping,  business  forms,  credits,  etc.,  and 
will  be  asking  repeated  questions  to  learn  about  one's 
ability  and  business  experience.  The  inventor  should 
show  that  he  realizes  the  importance  of  good  adver- 
tising and  of  buying  the  equipment  and  stock 
cheaply. 

If  one  has  a  meritorious  article,  he  must  not  be  timid. 
An  investor  may  not  be  talkative  and  may  think 
deeply.  Sometimes  it  will  be  a  good  plan,  in  ap- 
proaching manufacturers,  to  submit  all  references 
cited  against  a  patent  application  by  the  Patent  Office 
,  examiners.  Too  much  attention  cannot  be  paid  to 
this  important  feature.  The  manufacturer  will  be  in 
a  position  to  arrive  at  a  clear  understanding  of  the 
mechanical  advantages  of  an  invention  and  will  be 
better  able  to  gauge  market  conditions. 

Mr.  Francis  Cooper,  in  his  invaluable  book,  which 
every  inventor  should  read,  entitled  "  Financing  an 
Enterprise/'  goes  exhaustively  into  the  inquiries 
which  an  inventor  or  investor  may  have  to  answer 
concerning  the  joint  enterprise.  No  matter  how 


98  Sale  of  Inventions 

small  one's  efforts  toward  getting  the  invention 
"  placed  "  may  be,  or  how  ramified  one's  scheme  or 
plan  is,  —  no  matter  how  far  one  may  have  advanced 
with  any  undertaking,  he  must  be  prepared  to  answer 
any  or  all  of  the  following  questions:  It  will  be  well 
to  make  a  memorandum  of  them. 

A.  Nature  of  the  Enterprise. 

1.  Is  the  basis  of  the  enterprise  sound? 

2.  Is  the  business  of  the  enterprise  profitable 

elsewhere? 

3.  What  competition  or  opposition  will  be 

met? 

4.  What  peculiar  advantages  does  the  device 

enjoy  over  others? 

5.  Can  it  be  conducted  profitably  under  exist- 

ing conditions? 

B.  Plan  of  Organization  of  a  Corporation. 

1.  In  what  state  organized? 

2.  What  is  the  capitalization? 

3.  Is  the  capitalization  reasonable? 

4.  Has  the  stock  been  issued  in  whole  or  in 

part,   and   if   so   for   what,  —  for   con- 
sideration, money,  or  services? 

5.  Is  the  stock  offered  for  sale  paid  in  full 

and  nonassessable? 

6.  Has  any  of  the  stock  preference? 

7.  Is   any   stock   unissued   or   held   in   the 

treasury? 

8.  Who  has  stock  control? 

9.  Are  the  rights  of  small  stockholders  pro- 

tected? 

10.  Are  there  any  unusual  features  in  charter 
or  by-laws? 


Inventions  and  Investors  99 

C.  Present  Condition  of  Enterprise  as  to  Property. 

1.  What  property  or  rights  are  controlled? 

2.  What  is  their  value  and  how  estimated? 

3.  Are  these  properties  or  rights  owned  or 

held  under  lease,  license,  grant,  option, 
or  otherwise? 

4.  If  owned,  are  the  titles  perfect? 

5.  Are  there  any  encumbrances  on  the  prop- 

erties or  rights? 

6.  If  not  owned,  are  the  holding  papers  in 

due  form? 

7.  If  not  owned,  are  the  terms  of  holding 

reasonable,  satisfactory,  and  safe? 

8.  In  event  of  liquidation,  what  would  the 

property  be  worth? 

D.  Present  Condition  of  Enterprise  as  to  Operation. 

1.  What  operations  have  been  or  are  now 

being  carried  on? 

2.  What  have  been  the  results? 

3.  What  difficulties,  if  any,  have   been  en- 

countered? 

4.  What  is  the  demand  for  the  product  or 

operation  of  the  enterprise? 

5.  What  is  the  present  status  of  the  enter- 

prise? 

6.  Are  proper  books  kept? 

E.  Present  Condition  of  Enterprise  as  to  Finance. 

1.  What   are   the   present   assets   and   their 

actual  value? 

2.  What  debts,  claims,  fees,  rents,  royalties, 

or  other  payments,  or  obligations  are 
now  due  or  are  to  be  met  and 
carried? 


too  Sale  of  Inventions 

3.  From  what  resources  are  these  to  be  met? 

4.  Who  handles  the  money  and  under  what 

safeguards? 

5.  What  are  or  will  be  the  running  expenses, 

salaries,  etc.? 

F.  Management:  Directors. 

1.  How  many  members  are  on  the  board? 

2.  Who  are  these  members? 

3.  What  are  their  past  record  and  present 

business  status? 

4.  Who    are    the    active    members    of    the 

board? 

5.  Who  are  the  inactive? 

6.  Are  meetings  regularly  held  and  attended? 

7.  Who    compose  the   executive    committee, 

and  what  are  its  powers? 

8.  Are  the  directors  stockholders  and,  if  so, 

to  a  material  amount? 

G.  Management:  Officers. 

1.  Who  are  the  officers? 

2.  What  are  their  previous  records? 

3.  What  are  their  present  special  qualifica- 

tions? 

4.  What   compensation   do   they   receive   or 

are  they  to  receive? 

5.  Are  they  able  to  work  together  without 

friction? 

6.  Are  they  interested  in  the  enterprise  be- 

yond their  salaries? 
H.  Management:   Plan  of  Operation. 

1.  What  is  the  general  plan  of  operation? 

2.  What   special  reason,  if  any,   led  to  its 

adoption? 


Inventions  and  Fnvestiots 


7.    Disposition  of  Money  Asked  for. 

1.  Does  the  money  from  the  sale  of  stock  go 

into  the  treasury  of  the  company? 

2.  If  any  does  not  go  into  the  treasury  of  the 

company,  to  whom  does  it  go  and  for 
what  purpose? 

3.  Of  money  going  into  the  treasury,  what 

proportion  goes  into  active  development 
and  operation? 

4.  What  part  goes  to  pay  off  existing  debts, 

obligations,  and  claims? 

5.  What  part,  if  any,  goes  to  pay  for  pro- 

motion expense,  commissions,  etc.? 

6.  How  is   the   development   and   operating 

money  to  be  applied? 

7.  Is  the  amount  asked  for  sufficient  to  ac- 

complish the  desired  results? 

8.  Will  it  place  the  company  on  a  self -sup- 

porting or  profitable  basis? 
J.    The  Proposition. 

1.  Is  the  general  proposition  a  fair  one? 

2.  Is  the  price  of  stock  or  bonds  reasonable? 

3.  How  do  these  prices  compare  with  any 

former  prices? 

4.  If  common  stock  is  offered,  do  preferred 

stock,  bonds,  or  other  profit-sharing 
obligations  take  precedence  and  to  what 
amount? 

5.  What  reserve  of  profits  will  be  retained 

before  dividends  are  to  be  declared? 

6.  If  preferred  stock  is  offered,  is  it  cumu- 

lative, does  it  vote?  When  is  it  redeem- 
able and  at  what  price?  What  sinking 


Sale  of  Inventions 

fund  provision  is  made  for  redemption, 
and  are  peculiar  provisions  attached? 
Do  any  bonds  or  other  obligations  take 
precedence  of  the  preferred  stock? 
7.  If  bonds  are  offered,  what  interest  is  paid, 
and  when  and  where?  Upon  what  prop- 
erty are  they  secured  and  when  and 
how  are  they  paid?  Is  the  trustee  or 
trust  company  of  repute?  Under  what 
conditions  are  the  bonds  foreclosable? 
When  or  how  are  they  or  may  they  be 
redeemed?  Are  there  any  other  se- 
curities taking  precedence,  and  is  there 
any  peculiar  provision  in  the  deed  of 
trust? 
K.  General. 

1.  What  is  the  previous  history  of  the  enter- 

prise,  or  the  property  or  undertaking 
on  which  it  is  based? 

2.  If  inventions  enter  prominently,  what  is 

the  previous  record  of  the  inventor? 

3.  By  whom  are  the  statements  made,  and 

is  the  person  making  them  reliable? 

4.  Are  there  any  contracts  or  obligations  not 

now  effective  by  which  the  enterprise 
will  subsequently  be  affected? 
In  the  last  analysis,  securing  money  to  finance  a 
business  depends  upon  the  confidence  one  may  inspire. 
The  investor  reasons:   "  Can  you,  as  the  chief  personal 
element  in  your  proposition,  be  relied  upon  absolutely, 
and   does  your  business   judgment  warrant  trust? " 
The  factors  controlling  one's  chances  of  getting  cap- 
ital are:  (i)  Personality;  (2)  Assets;  (3)  Proposition. 


Inventions  and  Investors  103 

Personality  means  the  power  to  inspire  confidence. 
By  that  is  meant  not  only  appearance  and  presence  l 
but  character  and  ability.  Commercial  bankers  con- 
sider personality  as  the  greatest  of  credit  factors. 
Banks  consider  ability  as  relatively  essential;  in- 
tegrity as  absolutely  essential;  property  not  necessarily 
so. 

The  assets  an  inventor  has  show  his  ability  to  pay 
back  should  he  contemplate  a  loan. 

Is  the  enterprise  based  on  a  new  invention  or  an 
untried  scheme,  and  does  it  involve  no  new  principle? 
Is  the  risk  great?  Do  the  chances  for  profit  warrant 
the  risk?  Competition  exists  wherever  the  new  enter- 
prise is  not  based  on  an  untried  scheme.  Invention 
may  dispel  competition;  therein  lies  its  true  value. 
The  propositions  which  have  the  best  chance  to  secure 
backing  are  those  that  supply  a  want  widely  and 
generally  felt. 

When  negotiations  are  reached  bearing  upon  the 
compensation  of  the  inventor,  the  manufacturer's 
chances  of  gain  come  first.  The  first  thought  the 
manufacturer  will  try  to  impress  on  the  inventor 
during  negotiations  for  a  royalty  agreement  is  that 
whatever  amount  is  decided  on,  it  adds  just  that 
much  to  the  cost  of  the  product.  That  is  a  fact  and 
must  be  admitted  by  the  inventor.  During  negotia- 
tions he  must  prepare  for  the  rocks  ahead.  However, 
if  a  device  costs  less  than  a  competing  article  or  can 
be  sold  for  more,  it  is  admissible  for  the  inventor  to 
claim  his  share  of  such  saving  or  extra  profit.  One 
must  be  on  the  lookout  for  capitalists  who  are  likely  to 
give  help.  Money  is  plenty,  but  brains  are  scarce. 
Deal  only  with  earnest  men,  do  not  fool  away  precious 


104  Sale  of  Inventions 

time  with  men  who  do  not  mean  business.  Again, 
it  is  necessary  to  remind  the  inventor  that  the  moment 
he  gets  his  prospective  investor  to  make  an  initial 
outlay  to  start  a  business  manufacturing  his  invention, 
he  is  fairly  on  the  road  to  success. 

Get  the  investor  to  buy,  contract  for,  or  pay  for 
something  which  the  business  must  have,  which  he 
can  see  is  necessary  and  the  road  will  be  much  easier 
than  if  followed  in  any  other  way.  A  small  corpora- 
tion is  apt  to  prove  very  unruly.  The  profit  is  not 
large  enough  to  divide  among  several,  and  the  result 
is,  there  is  a  continuous  scramble  for  the  ascendency 
in  management  and  salary.  In  starting  a  factory 
and  forming  an  estimate  of  the  needed  working  funds, 
the  amount  should  be  made  as  low  as  possible,  taking 
into  necessary  consideration  the  fact  that  a  manu- 
facturer is  entitled  to  credit  at  the  bank.  The  in- 
vestor's first  question  is  almost  sure  to  be  about  the 
stock  and  material  and  the  "next  about  the  fixtures 
necessary.  Any  of  these  expenses,  rent,  material, 
fixtures,  machinery,  and  tools,  are  absolutely  neces-  , 
sary  to  the  starting  and  proper  conduct  of  a  manu- 
facturing establishment. 


CHAPTER  XII 
INVENTOR  AND  CAPITALIST 

fTT\0  a  large  number  of  inventors,  raising  capital 
and  meeting  capitalists  is  more  or  less  of  a 
bugaboo,  an  affair  fraught  with  difficulties, 
a  drawn  game.  Of  course,  it  is  no  simple  task  to 
obtain  financial  assistance;  yet  raising  capital  is  only 
a  question  of  a  little  study,  application,  and  patience. 
It  is  not  new.  To  many  people  it  is  a  thing  shrouded 
in  mystery;  but  when  considered  properly,  it  is  found 
to  be  much  simpler  than  learning  a  trade  and  far 
easier  than  saving  money  out  of  ordinary  incomes. 

There  is  plenty  of  capital  waiting  for  profitable 
employment.  If  the  demands  of  labor  are  profit- 
destroying,  the  manufacturers  will  take  more  and 
more  to  machines.  They  will  shrug  their  shoulders 
at  the  personal  equation.  There  are  capitalists  an- 
xious to  get  in  touch  with  good  ideas.  It  is  neces- 
sary to  proceed  in  a  businesslike  way  to  succeed. 
That  many  things  lie  unheard  of  for  years  is  due  simply 
to  the  lack  of  means  of  bringing  inventor  and  capi- 
talist together.  The  man  who  spends  his  life  devising 
and  inventing  may  yet  hope  to  obtain  assistance  from 
expert  manufacturers  and  salesmen.  The  nearer  one 
is  to  his  home  city  in  marketing  an  invention,  the 
greater  the  chances  of  avoiding  fraud,  the  better 
facilities  he  will  have  for  succeeding  and  for  investi- 
gating conditions.  If  the  reader  knows  how,  he  can 

105 


106  Sale  of  Inventions 

utilize  the  intelligence  and  labor  of  others.  After 
all,  the  ability  to  do  that  is  what  distinguishes  the 
work  of  the  boss  from  the  work  of  his  employees. 
One  must  cultivate  a  successful  attitude  long  before 
success  will  become  his  share.  John  W.  Gates,  who 
piled  up  millions  of  dollars  in  various  enterprises,  said 
that  "  many  a  man  has  lost  a  fortune  by  passing  up 
an  opportunity  of  getting  into  a  great  enterprise 
during  its  infancy." 

Mutual  benefit  is  the  keynote  which  rings  the 
loudest  in  the  endeavor  to  bring  the  inventor  and 
capitalist  together.  The  manufacturer  must  have 
the  inventor  to  make  money  and  vice  versa.  Neither 
the  capitalist  nor  the  inventor  is  satisfied  with  his 
income.  The  majority  of  people  have  realized  that 
the  growth  of  income  is  not  keeping  pace  with  the 
growing  cost  of  living.  The  man  who  never  tried, 
never  helped  himself  or  any  one  else.  The  individual 
inventor  with  ideas  can  readily  find  a  hearing  if  he 
has  anything  worth  while.  The  inventor  of  a  good 
thing  has  an  easier  and  better  opportunity  to  market 
his  patent  than  ever  before  in  the  history  of  the  world. 
Yet,  strange  to  say,  capital  is  getting  more  conserva- 
tive. Investors  are  waiting  for  the  right  kind  of 
invention.  They  will  be  glad  to  take  it  up  and  market 
it  honestly  and  enthusiastically. 

It  must  be  conceded  that  the  way  the  capitalist 
sizes  up  the  opportunity  of  investing  in  patents  is  not 
the  way  the  inventor  sizes  it  up.  The  manufacturer 
views  the  situation  from  the  standpoint  that  he  is 
risking  real  money,  should  a  later  noninfringing  inven- 
tion be  brought  out  by  a  competitor  and  supplant 
the  invention  he  is  considering,  against  what  he  usually 


Inventor  and  Capitalist  107 

considers  only  time  and  material  expended  by  the  in- 
ventor; or  putting  it  in  another  way,  the  manu- 
facturer believes  he  is  risking  money  made  in  the 
past  from  prior  business  enterprises  —  a  definite  thing 
of  known  value  —  against  the  inventor's  submitting 
an  invention  the  value  of  which  is  undetermined  and 
therefore  an  indefinite  thing.  He  figures  that  an  in- 
ventor may  be  a  genius,  but  he  is  running  up  bills. 

Show  the  capitalist  where  his  benefit  lies,  that  the 
risks  he  encounters  are  only  those  incidental  to  any 
commercial  undertaking,  but  that  the  benefit  may 
be  greater  in  the  long  run.  The  capitalist  knows 
what  it  costs  the  dealer  to  do  business.  He  knows 
that  it  costs  the  dealer  from  twenty  to  forty  per  cent 
and  on  an  average  above  thirty  per  cent  for  overhead 
expenses  before  a  profit  steps  in  over  and  above  the 
cost  of  goods.  The  profits  made  on  some  staple 
articles  follow:  Hats  54%,  shirts  333%,  raincoats  37%, 
wrenches  42%,  Welsbach  mantels  33%,  Yale  locks  50%, 
glue  25%,  pencils  45%,  ink  22%,  filing  cabinets  50%, 
tennis  balls  100%,  films  33%,  stoves  50%,  shaving 
sticks  27%. 

It  is  gratifying  to  know  that  men  with  capital  have 
more  confidence  at  present  in  proposed  inventions 
than  in  the  time  of  Murdock,  the  inventor  of  artificial 
lighting  by  gas.  Sir  Humphry  Davy,  an  inventor  of 
no  little  nerve  himself,  the  one  who  devised  the  miner's 
lamp,  asked  Murdock  if  he  expected  to  use  the  dome 
of  St.  Paul's  for  a  gas  holder.  Sir  Walter  Scott  made 
many  clever  jokes  about  it.  Wollaston  declared  that 
they  might  as  well  try  to  light  London  by  a  slice 
from  the  moon  as  to  send  the  light  through  the  streets 
in  pipes.  The  modern  business  man  is  compelled 


io8  Sale  of  Inventions 

to  adopt  new  ideas  all  the  time.  He  does  not  affect 
to  see  fancied  spots  in  the  sun.  Changes  sure  to 
occur  in  the  business  world  make  it  necessary  that 
men  should  at  all  tunes  have  in  reserve  some  dennite 
plans  of  action  in  the  event  of  disaster.  An  invention 
in  the  possession  of  anybody  is  this  stepping-stone, 
an  unworked  mine.  Many  are  they  who  have  capital 
to  invest  but  know  of  no  paying  investment. 

The  claim  of  inventors  for  special  consideration  is 
well  recognized  to-day,  and  it  is  known  that  they  are 
among  the  greatest  contributors  to  the  world's  progress. 
Thomas  Edison  said  some  years  ago  that  he  thought 
it  was  time  that,  in  this  country,  the  same  brains 
and  genius  should  be  applied  to  selling  and  distri- 
bution that  have  been  applied  to  invention.  He 
made  the  remark:  "  Why  don't  you  fellows  who 
are  selling  goods  invent  something." 

How  far  a  capitalist  will  go  in  helping  an  inventor 
depends  upon  the  measure  of  confidence  inspired  by 
the  inventor.  The  old  complaints,  "  It  takes  money 
to  get  money  "  and  "  I  never  had  a  chance,"  are  an 
old  song;  money  is  waiting  for  investment.  It  can 
be  raised  by  any  business  capable  of  creating  profits. 
There  is  no  use  fencing  with  the  question.  The 
burden  of  proof  is  in  the  inventor;  if  he  has  a  propo- 
sition of  merit,  he  must  show  that  it  has  merit.  The 
inventor  must  plan,  study  his  business,  and  take  an 
active  personal  part  in  securing  the  confidence  that 
will  alone  insure  success.  It  is  necessary  to  cater  to 
the  desires  of  the  capitalist  and  to  view  matters  from 
his  angle.  Let  the  inventor  place  himself  mentally 
at  least  in  the  position  of  the  investor  and  view  his 
expectations  through  his  eyes,  taking  due  considera- 


Inventor  and  Capitalist  109 

tion  of  his  standpoint  and  telling  him  he  is  expected 
to  reciprocate. 

Gain  the  good-will  of  the  capitalist.  If  one  has 
reached  the  point  where  one  assigns  an  interest  in  a 
patent,  or  whenever  one  has  a  consultation  with  a 
manufacturer  about  an  assignment,  one  should  during 
the  conference  explain  the  legal  provisions.  This  will 
result  in  the  agreement  or  compensation.  As  long 
as  he  understands  these  provisions,  he  will  defend  the 
agreement  when  he  talks  the  settlement  over  with 
his  friends.  He  will  live  up  to  his  end  of  the  agree- 
ment, for  then  there  can  be  no  misunderstanding. 
There  will  be  no  jarring  of  interests.  One  must  not 
overlook  his  own  interest.  Once  a  business  is 
started,  to  work  a  good  invention  the  investor  should 
take  such  steps  for  the  safety  of  the  business  as  may 
be  necessary,  such  as  obtaining  a  lease  of  the  build- 
ing, having  the  validity  investigation  of  the  patent 
conducted,  etc.;  but  he  should  not  bother  with  this 
personally;  he  will  be  interested  in  developing  the 
invention,  in  seeing  it  made.  The  inventor's  position 
should  be  that  of  superintendent  with  a  salary  at  the 
start.  This  is  even  more  important  than  being  the 
president  or  business  manager. 

The  manufacturer  is  expected  to  take  the  risk. 
According  to  the  nature  and  importance  of  any  pat- 
ented article  that  seems  to  be  good,  a  greater  or  less 
sum  is  spent.  The  secret  of  winning  capitalists  on  the 
part  of  the  inventor  is  taking  a  risk.  A  capitalist  is 
expected  to  do  so,  so  to  be  consistent,  one  must  do  so 
himself.  All  that  is  expected  is  to  place  an  effective 
advertisement  for  capital.  Perhaps  ten  million  people 
in  the  last  ten  years  have  considered  advertising  as  a 


no  Sale  of  Inventions 

means  of  securing  capital.  How  could  they  avoid 
it,  since  the  evidence  of  what  others  do  is  constantly 
before  them?  But  to  "  consider  "  was  as  far  as  they 
ever  went.  Why?  Because  of  fear,  ignorance,  stingi- 
ness, —  mostly  these.  It  is  strange,  yet  surprisingly 
true,  that  a  man  in  the  full  possession  of  his  senses 
can  let  a  ten-dollar  note  stand  between  him  and  suc- 
cess. He  believes,  no  doubt,  in  advertising  and  that 
it  pays  others,  but  he  cannot  see  how  it  can  ever 
pay  him. 

Why  not?  A  newspaper  page  is  no  respecter  of 
persons,  so  why  should  not  one's  own  "  ad  "  be  as 
profitable  as  that  of  other  people?  A  man  will  try 
to  get  out  of  his  rut;  he  believes  that  advertising  can 
help  him;  he  actually  sits  down  and  figures  out  the 
cost,  but  being  controlled  by  just  one  figure,  he  cuts 
down  the  length  of  the  "  ad  "  until  it  fails  to  be  ef- 
fective. He  keeps  chopping  out  more  and  more 
words  until  finally  he  inserts  three  or  four  lines  and 
expects  to  pull  $5000.  All  this  is  nonsense. 

However,  if  the  great  truth  were  known,  it  would 
be  found  that  nine  million  out  of  ten  million  people 
never  get  so  far  as  to  write  the  "  ad  ";  so  tight  is  the 
human  purse  string.  This  very  tendency  keeps  mil- 
lions out  of  the  running.  But  let  it  be  remembered 
that  if  it  is  so  hard  for  one  to  part  with  a  little  money 
for  advertising,  how  much  harder  must  it  be  for  an 
investor  to  give  up  a  great  deal  of  money  for  a  similar 
reason.  It  is  diamond  cut  diamond.  Therefore  it 
will  be  necessary  to  put  out  a  decent  sized  "  ad  "  if 
one  puts  out  one  at  all.  Do  not  be  afraid  of  a  ten 
or  twenty-dollar  bill  when  it  comes  to  advertising  for 
capital.  If  one  keeps  at  it  he  will  win  out,  —  will 


Inventor  and  Capitalist  in 

give  commands  to  others  rather  than  meekly  take 
them.  The  whole  question  of  self-confidence  lies 
in  getting  the  first  few  replies.  Practice  on  these. 
There  are  enough  probable  promoters.  No  class  is 
so  anxious  for  new  and  attractive  propositions  as 
that  composed  of  wealthy  men.  They  live  by  the 
labors  of  others  and  wish  to  continue  doing  so.  This 
applies  all  the  way  up  from  the  man  who  has  a  thou- 
sand spare  cash  to  the  one  who  has  the  coveted  million. 
Above  everything  else,  let  the  inventor  be  true  in 
his  statements  concerning  the  construction  and  opera- 
tion of  his  invention.  The  prospective  investor  will 
hold  him  to  his  statements.  A  written  statement 
will  often  be  required  of  an  inventor  over  his  own 
signature.  This  report  will  many  times  be  found  of 
material  assistance.  A  decided  difference  will  some- 
times be  noticed  between  the  verbal  statement  and 
the  one  to  which  he  is  willing  to  subscribe  his  name. 
Excessive  claims,  verbally  stated,  are  usually  tempered 
when  written. 


CHAPTER  XIII 

OPPORTUNITIES  FOR  INVESTMENT  AND 
FACTS  ABOUT  INVESTORS 

'"TTMHS  chapter  is  especially  concerned  with  invent- 
ors who  are  abreast  with  the  best  information 
on  business  and  who  have  allowed  no  oppor- 
tunities to  slip  through  their  ringers.  Other  chapters 
will  be  devoted  to  the  treatment  of  subjects  intended 
to  make  the  mechanic-inventor  conversant  with  the 
business  end  of  selling  inventions.  However,  every 
patentee  should  carefully  consider  the  facts  contained 
in  this  chapter.  Getting  capital  is  not  the  easiest 
thing;  one  must  employ  shrewdness  and  discretion. 
The  investor  must  be  made  to  have  confidence  in  the 
inventor. 

As  to  the  nature  and  characteristics  of  patent  oppor- 
tunities, it  may  be  said  that  if  one  advertises  for  capital 
properly,  he  will  obtain  prospects.  By  advertising, 
people  know  what  is  what.  The  better  portion  of  the 
middle  class  includes  those  who  usually  answer  ads 
for  capital;  they  are  the  most  desirable.  They  may 
just  have  reached  the  point  where  they  see  the  need 
of  more  money,  where  they  could  better  their  standard 
of  living  with  a  bigger  income.  So  they  are  precisely 
in  one's  own  position  from  the  money  point  of  view. 
The  inventor  wants  money  to  use;  they  have  money, 
but  want  to  make  more.  Every  man  of  means  is  a 
fit  object  of  approach  on  the  part  of  the  inventor. 

112 


Opportunities  for  Investment  113 

The  average  man  does  not  object  to  making  more 
money,  but  he  must  be  shown  how.  He  must  be 
given  reins  for  his  imagination. 

Find  out  why  the  prospects  ought  to  buy.  Never 
approach  a  prospect  without  considering  these  ques- 
tions: "  Why  should  this  prospect  buy  my  goods? 
Of  what  value  will  they  be  to  him?  Will  he  be  bene- 
fited by  making  this  purchase?  Will  it  be  to  his 
best  interest  to  buy?  "  It  is  a  great  truth  to  realize 
that  the  average  financial  men  of  good  standing  are 
ready  to  help  the  inventor  and  give  him  capital,  but 
they  are  not  enthusiastic.  They  are  waiting  to  receive 
with  open  arms  the  inventor  with  something  of  money- 
making  value,  but  they  want  to  be  shown.  They 
want  to  be  somewhat  sure  so  as  not  to  squander  a 
fortune.  They  have  plenty  of  wherewithal,  but  they 
will  consider  no  project  which  is  on  a  sandy  basis. 

Of  course  there  are  men  who  are  blind  to  real  op- 
portunity. Many  investors  fail  to  recognize  a  good 
opportunity.  They  are  water-logged.  We  know  of 
a  man  who,  in  the  early  days  of  the  telephone,  was 
offered  a  quarter  interest  in  the  patent  for  $1500.  It 
is  reported  that  the  rights  for  the  whole  state  of  New 
Jersey  were  offered  to  another  man  for  a  mere  nominal 
sum.  But  investors  are  becoming  more  diplomatic 
in  distinguishing  between  good  and  fatal  proposi- 
tions. They  know  which  are  likely  to  have  a  run  of 
fortune.  Many  a  good  patent  has  gone  a-begging  or 
has  been  lost  to  persons  first  approached  for  the  sole 
reason  that  they  had  but  an  insufficient  acquaintance 
with  the  subject  of  patents  and  were  generally  unable 
to  take  the  proper  initiatory  steps  of  investigation  or 
were  unwilling  to  incur  the  expense  to  do  so.  The 


H4  Sale  of  Inventions 

present  book  has  been  prepared  for  just  such  persons. 
It  is  necessary  to  open  their  eyes. 

Big  men  do  interest  themselves  in  inventions.  One 
of  the  largest  capitalists  of  Wall  Street,  a  banker  of 
nation-wide  fame,  has  interested  himself  in  a  score 
or  more  new  inventions.  One  of  them  was  a  Thermos 
bottle,  and  seven  or  eight  were  electrical  inventions 
of  extraordinary  character.  A  certain  railroad  presi- 
dent of  New  York  interested  himself  in  making  steel 
rust-proof.  A  new  organization  for  producing  com- 
pressed gas  names  as  two  of  its  directors  the  heads  of 
two  of  the  greatest  industrial  trusts  in  the  country. 
So  it  will  be  seen  that  if  men  of  large  means  are  at  all 
interested  in  an  undertaking,  they  usually  take  it  up 
hi  its  entirety  and  finance  it  either  alone  or  with  their 
associates.  They  are  willing  to  come  in  for  a  share  of 
the  inventor's  "  luck." 

The  smaller  the  manufacturer,  the  better  must  be 
the  merit  of  his  goods  and  the  keener  his  interest  in 
patented  inventions  in  order  to  gain  a  real  advantage 
over  his  larger  rivals.  But  degrees  of  merit  will  count 
with  the  big  investor,  if  there  is  enough  in  it  for  him. 
Most  men  of  means  expect  to  get  a  controlling  interest 
in  a  new  undertaking.  This  does  not  mean  that  the 
inventor  is  to  be  frozen  out,  but  simply  that  the  in- 
ventor must  give  capital  a  good  return,  as  it  may 
mean  the  turning  point  in  his  career.  A  manufacturer 
may  not  care  to  bother  about  giving  an  article  a  better 
form  01  appearance,  but  he  will  be  instantly  inter- 
ested in  adopting  labor-saving  machinery  in  his  plant 
to  counteract  rising  cost.  The  article  turned  out 
may  be  the  same  or  better,  but  there  is  a  change  on 
the  method  of  production  which  appeals  directly  to 


Opportunities  for  Investment  115 

the  pocketbook  of  the  manufacturer.  Such  inven- 
tions always  pay  in  the  end.  Labor-saving  processes 
of  demonstrated  value  and  efficiency  are  what  all  men 
are  lying  in  wait  for,  especially  if  the  cost  of  replace- 
ment is  slight  compared  with  the  value  of  machinery 
to  be  discarded  in  favor  of  improved  machinery.  No 
manufacturer  will  put  an  extinguisher  upon  projects 
to  reduce  the  cost  of  producing  an  article. 

Give  facts  to  the  investor.  One  must  talk  profits, 
but  one's  estimate  of  profits  must  be  conservative,  in 
keeping  with  the  ordinary  everyday  experience  of  man- 
kind. If  one's  figures  are  conservative,  the  investor 
will  respect  one  all  the  more,  and  one  will  be  in  a  fair 
way  to  succeed.  Nothing  goes  without  capital  in 
the  industrial  world.  Capitalists,  recognizing  this, 
are  able  to  command  the  situation  over  the  inventor. 
This  is  true  as  long  as  an  enterprise  is  unsettled  or 
unproved,  while  capital  is  of  an  established  and  known 
value.  Be  sure  that  if  the  investor  does  invest,  he 
will  part  with  the  least  amount  of  money  to  do  busi- 
ness. Capitalists  are  usually  able  men  of  affairs. 
If  one  writes  to  manufacturers  for  financial  assist- 
ance, one  must  remember  that  they  are  usually  experts 
in  their  line.  If  the  invention  has  merit,  it  ought  to 
succeed.  Although  business  men  are  often  obtuse  in 
seeing  a  good  thing,  and  lukewarm  in  acknowledging 
it,  as  a  rule  they  will  seize  upon  anything  of  true  value 
to  them,  by  which  they  can  derive  some  advantage  over 
their  competitors.  It  is  not  usually  advisable  to 
mention  price  in  the  first  letter. 

If  one  receives  answers  and  arranges  for  an  inter- 
view, it  is  necessary  to  bring  the  letter  along  for  iden- 
tification and  as  evidence  of  power  to  act  in  the  matter. 


n6  Sale  of  Inventions 

In  the  case  of  many  firms,  callers  may  mean  intrusion 
on  the  busy  hours  of  a  busy  man.  The  inventor 
should  himself  suggest  that  the  manufacturer  or  cap- 
italist investigate  his  proposition.  The  intelligent 
investor  will  want  to  submit  the  prospectus  offered 
him  to  the  examination  of  men  qualified  by  experi- 
ence and  study  to  talk  intelligently  about  it  as  a 
commercial  proposition.  Investors  who  have  lost 
money  on  inventions  before,  have  a  rule  and  here  it 
is:  "  Never  pay  any  attention  to  what  the  inventor 
himself  has  to  say."  Do  not  expect  the  investor  to 
know  much  about  a  new  proposition.  Leave  the 
door  open  for  investigation.  As  a  rule  the  inventor 
has  spent  months  if  not  years  working  out  the  fortune- 
producing  details  of  his  plan  or  scheme  to  get  the 
most  out  of  his  invention.  It  has  become  his  pet 
scheme.  But  remember  that  as  yet  the  investor  is 
not  imbued  with  this  enthusiasm.  It  is  absolutely 
necessary  to  interest  him  further. 

Before  placing  an  "  ad  "  in  the  paper  for  financial 
assistance  or  writing  letters  to  those  who  may  be  in- 
terested, it  may  be  well  to  eliminate  the  money  man 
indirectly  if  one  can;  if  not,  let  him  go  ahead.  The 
nature,  character,  and  salability  of  the  patented  article 
one  wishes  to  manufacture  will  determine  this,  and 
also  whether  one  will  want  many  or  a  few  to  help  in 
pushing  it. 

A  loom  that  costs  $20,000  to  manufacture  cannot 
be  sold  as  if  it  were  a  breakfast  food.  There  may  be 
only  fifty  possible  buyers  in  the  country.  Leasing 
is  best  adapted  as  a  business  method  of  placing  a 
complicated  machine  on  the  market.  Still  there  are 
some  who  will  not  consider  the  lease  of  an  invention. 


Opportunities  for  Investment  117 

As  a  rule  the  United  States  Government,  the  biggest 
of  contractors,  will  not  pay  royalties  on  inventions. 
It  insists  on  owning  its  own  machinery.  Few  in-; 
ventors  grow  rich  on  mere  royalties  alone.  The 
inventor  can  agree  to  sell  his  invention  below  cost, 
provided  the  buyer  purchases  another  unpatented 
article  from  him  on  which  he  does  make  profits.  To 
get  the  most  out  of  any  invention,  one  must  become  a 
manufacturer.  That  is  the  secret  of  the  success  of 
Edison.  His  method  is  that  adopted  by  most  knowing 
patentees.  The  presses  used  in  the  Government 
mint  for  coining  metal  are  produced  and  sold  by  their 
inventor,  Oberlin  Smith.  In  Pawtucket,  R.I.,  is 
a  prosperous  plant  built  by  two  inventors  of  success- 
ful metal-shaping  machinery.  The  instruments  used 
in  the  telephone  central  stations  to  record  the  dura- 
tion of  a  conversation  were  invented  by  a  man  who 
is  president  of  the  company  by  which  they  are  made. 


CHAPTER  XIV 

THE  PRESENTATION  OF   THE 
INVENTOR'S  PROPOSITION 

NO  one  can  overestimate  the  importance  of 
this  subject.  There  are  quite  a  few  ques- 
tions which  the  inventor  must  decide  for 
himself  before  preparing  a  prospectus  that  will  explain 
all  the  details  of  exploiting  an  invention.  The  in- 
ventor should  make  up  his  mind  whether  or  not  he 
possesses  the  requirements  of  a  salesman  who  could 
sell  the  invention  when  it  is  manufactured.  If  he 
can  sell  it  himself,  he  need  not  be  bothered  with  the 
trouble  of  properly  presenting  any  proposition  in  the 
formal  manner  to  be  discussed  hereafter. 

It  is  best  to  be  able  personally  to  look  after  the 
details  of  making  and  selling  a  patented  article.  As 
an  inventor,  a  man  has  certain  strong  advantages  over 
all  others.  In  fact,  a  man  will  not  ordinarily  get 
success  out  of  doing  a  thing  as  other  people  do  it. 
Inventors  know  this,  and  that  is  why  they  have  done 
otherwise;  that  is  the  reason  they  took  to  inventing. 
After  letting  it  be  known  that  he  is  an  inventor  and 
has  a  meritorious  article,  a  man  should  have  no  more 
difficulty  in  getting  an  interview  as  a  salesman  than 
as  a  promoter  of  his  own  invention.  But  he  must 
come  up  to  expectations.  He  should  bear  in  mind 
that  he  does  not  usually  have  to  combat  the  untract- 
able  and  stubborn  opposition  which  an  ordinary  sales- 

118 


Presentation  of  the  Inventor1  s  Proposition     119 

man  has  to  overcome  in  order  to  get  an  interview  with 
a  business  man  to  sell  him  something.  He  does  not 
have  to  hammer  out  his  way. 

The  preceding  chapters  have  shown  that  it  is  the 
consumer  who  will  make  or  mar  one's  chances  of 
creating  a  market  for  a  patented  article  and,  what  is 
equally  true,  that  one  has  got  to  see  to  it  that  one's 
invention  is  used.  An  unused  patent  will  bring  in 
nothing  unless  by  luck  some  person  notices  it.  What 
is  worth  doing  is  worth  doing  well.  It  is  necessary 
either  to  start  a  business  oneself  for  making  and  selling 
a  patented  article  or  else  to  get  others  to  do  so.  But 
one  must  know  what  he  is  doing  before  he  starts. 
If  he  bases  his  experience  upon  ignorance,  he  gets  no 
results;  if  he  bases  his  experience  on  some  knowledge, 
he  gets  some  results.  But  if  one  bases  his  experience 
upon  applied  knowledge,  there  is  no  limit  to  his  suc- 
cess. There  is  then  no  chance  to  run  up  against  failure. 

Some  lines  of  business  call  for  a  wide  range  of  knowl- 
edge and  ability  which  no  single  person  can  combine. 
For  example,  the  owner  of  a  manufacturing  plant, 
may  have  expert  knowledge  of  factory  management, 
but  he  may  be  weak  on  sales  organization.  The  in- 
ventor should  take  no  chances.  If  his  business  ex- 
perience is  not  sufficient,  those  who  know  should 
help  him. 

The  inventor  who  has  secured  his  patent  has  less 
difficulty  in  disposing  of  his  invention  than  the  in- 
ventor who  has  not  reached  this  stage.  His  plans 
are  not  mere  tea  table  talk.  However,  as  soon  as 
a  successful  model  has  been  made,  his  chances  have 
increased.  Money  will  then  be  easy  to  secure,  be- 
cause if  the  invention  has  merit,  only  the  business 


I2O  Sale  of  Inventions 

risk  has  to  be  considered  by  the  investor.  Thus 
armed,  the  inventor  is  able  to  meet  the  investor  with 
composure;  he  can  put  a  good  face  upon  the  situation. 
To  be  sure,  his  patents  are  running  out  against  him, 
but  a  moderate  delay  is  not  serious.  At  this  stage  the 
inventor  may  commit  a  grave  mistake.  If  he  begins 
the  construction  of  tools  and  machinery,  he  is  leaving 
the  field  of  invention  and  invading  the  domain  of 
business.  He  must  then  be  very  sure  that  he  has  the 
ability  and  means  to  carry  the  enterprise  through  the 
financial  success.  If  he  has  not  the  money,  he  com- 
mits his  worst  mistake.  The  business  cannot  stand 
still;  it  must  either  go  forward  or  backward.  Rent 
is  running,  bills  for  labor  and  material  must  be  paid, 
general  expenses  are  mounting.  Under  these  condi- 
tions business  men  will  look  upon  the  enterprise  as 
a  failure. 

Having  decided  to  enlist  capital  and  the  cooperation 
of  the  proper  men  to  push  the  invention  of  merit, 
and  having  advanced  far  enough  with  it  in  the  esti- 
mation of  himself  or  others,  whether  of  the  Patent 
Office  or  among  the  consumers,  manufacturers,  or 
sellers,  the  inventor  needs  a  prospectus,  either  elabo- 
rate or  simple.  This  prospectus  represents  his  battery 
of  talking  points  arranged  strategically  so  as  to  "  pull  " 
with  his  prospects. 

Theoretically,  a  plain,  honest  statement  of  the  facts 
and  conditions,  free  from  honeyed  words,  color,  or 
prejudice  of  any  kind  and  coupled  with  a  reasonable 
offer,  ought  to  get  the  money  needed  for  a  good  enter- 
prise. Occasionally  it  will,  but  in  ninety-nine  cases 
out  of  a  hundred  it  will  not.  Such  a  presentation 
lacks  attractiveness;  it  is  a  mere  random  shot.  Capital 


Presentation  of  the  Inventor9 s  Proposition     121 

is  timid  and  must  be  reassured.  If  this  is  not  done, 
capital  usually  betakes  itself  off  to  some  other  enter- 
prise, perhaps  not  so  good  but  more  attractively  pre- 
sented. The  statements,  however,  while  enthusiastic, 
should  not  misrepresent.  An  inventor  is  justified  in 
emphasizing  the  good  points  of  his  invention  and  of 
setting  them  forth  to  the  best  advantage.  He  is 
also  justified  in  showing  why  weak  points  are  not 
fatally  injurious.  However,  he  should  not  state 
hopes  as  accomplished  facts  so  as  to  lead  investors  to 
make  false  conclusions.  He  may  state  possibilities 
and  beliefs  as  strongly  as  he  wishes,  but  must  not 
shoot  with  a  long  bow. 

The  majority  of  inventions  to  be  financed  are  very 
inadequately  prepared  for  presentation,  due  to  ignor- 
ance or  unwiUingness  to  bear  the  expense  or  trouble 
involved.  In  framing  the  proposition,  good  common 
sense,  judgment,  and  business  ability  can  be  em- 
ployed to  advantage.  To  properly  set  forth  an  in- 
vention to  a  manufacturer  or  purchaser  it  is  essential 
to  show: 

1.  Its  advantages  over  well-known  devices  in  the 

art  to  which  it  appertains. 

2.  Its  cost,  based  if  possible  upon  experience  or 

taken  from  quotations  given  by  reasonable 
parties  for  its  production  by  the  dozen,  hun- 
dred, gross,  or  thousand,  as  the  case  may  be. 

3.  The  profits  to  manufacturers,  wholesalers,  and 

retailers. 

4.  The  market  to  be  supplied.    This  is  determined 

in  accordance  with  the  nature  of  the  inven- 
tion, —  whether  it  is  an  invention  useful  to 
both  sexes,  to  children  alone,  or  only  to  men. 


122  Sale  of  Inventions 

The  prospectus  should  be  put  into  the  right  hands 
for  perusal.  One  may  be  fortunate,  indeed,  if  one 
secures  a  good  manager,  for  a  most  important  essen- 
tial successfully  to  finance  an  enterprise  and  keep  up 
the  spirit  of  the  personnel  is  efficient  management. 
The  undertaking  may  be  meritorious,  the  money 
supply  may  be  more  than  adequate,  but  without  good 
management  failure  is  almost  assured.  A  good  man- 
ager is  not  usually  curtailed  by  a  lack  of  funds.  He 
can  take  his  stand  upon  effort.  If  the  enterprise  is 
yet  to  be  financed,  the  employment  of  a  manager 
known  to  be  competent  and  successful  is  of  material 
assistance  in  securing  funds.  But  even  if  one  cannot 
enlist  his  service,  his  testimonial  as  to  the  merits  of 
an  article  will  carry  much  weight.  If  the  manager  is 
to  give  his  time  to  the  operation  of  the  business,  make 
his  compensation  liberal. 

There  can  be  no  question  but  that  a  prospectus  is 
needed.  A  picture  never  sold  a  piece  of  property 
except  at  a  ridiculously  low  price.  Accompanying 
the  copy  of  patent  there  should  be  sent  out  to  manu- 
facturers a  statement  such  as  has  been  outlined  above. 
If  one  can  arrange  for  the  prospects  to  come  to  see 
him,  his  prospectus  will  serve  him  in  good  turn. 

Each  prospectus  should  contain  an  estimate  as  to 
the  probable  demand  for  the  articles  or  goods,  the 
cost  of  the  furniture  and  fixtures,  and  the  probable 
expenses,  sales,  and  profits  for  one  or  two  years.  One 
should  put  down  every  item  one  can  think  of. 

The  presentation  of  any  enterprise  which  is  well 
founded  is  either  public  or  private.  A  poor  pros- 
pectus is  certainly  worse  than  none.  It  should  be 
well  gotten  up  and  artistically  printed.  Then  it 


Presentation  of  the  Inventor's  Proposition     123 

will  "  take."  In  some  of  jthe  largest  cities  there  are 
bankers  and  others  who  make  a  specialty  of  pre- 
paring prospectuses.  A  good  short  prospectus  of  three 
or  four  pages  costs  at  least  twenty-five  dollars  and 
may  run  as  high  as  fifty  or  a  hundred  dollars.  It  is 
usually  possible  to  tell  about  how  long  a  prospectus 
should  be.  The  prospectus  writers  will  not  only  get 
up  the  prospectus,  but  will  also  very  often  suggest 
other  material  and  papers  necessary  for  an  effective 
presentation,  and  give  other  useful  advice.  If  the 
prospectus  is  to  be  printed,  the  professional  writer  will 
take  care  of  these  details.  In  a  private  presentation 
this  is  unnecessary.  Red-ink,  capitalizing,  and  scor- 
ing prospectuses  are  helpful  if  not  carried  to  excess. 
Legal  cap  paper  is  to  be  preferred  when  the  pros- 
pectus is  to  be  typewritten.  The  paper  should  be  of 
good  quality.  Do  not  give  carbon  copies  of  pros- 
pectuses to  important  men.  A  prospectus  should  be 
tasteful  and  striking  in  appearance. 

Do  not  begin  a  prospectus  with  the  organization 
data  of  the  enterprise  or  corporation  but  with  some 
attractive  matter  of  real  interest.  Sometimes  the 
names  of  the  financial  backers  are  the  most  import- 
ant items  to  state  in  the  prospectus.  Make  the  sub- 
ject of  the  prospectus  interesting  and  readable.  State 
all  the  important  facts  of  the  undertaking,  unless  some 
are  omitted  purposely  to  be  presented  in  other  ways. 
(See  investors'  questions  beginning  page  98.)  The 
presentation,  however,  should  not  be  too  full.  Simply 
state  enough  facts  to  show  the  real  value  of  the  enter- 
prise. The  strongest  appeal  and  most  convincing 
arguments  should  be  marshaled  at  the  close  of  the 
prospectus. 


124  Sale  of  Inventions 

To  arouse  interest  is  not  hard.  With  a  good  propo- 
sition there  is  no  such  difficulty.  We  shall  speak 
briefly  of  a  public  presentation  of  a  prospectus,  because 
that  is  something  the  inventor  cannot  safely  attend 
to  himself;  it  needs  the  services  of  a  skilled  promoter 
or  one  versed  in  such  matters.  It  is  necessary  to  send 
out  a  good  deal  of  printed  literature.  The  financial 
statement  may  appear  in  a  separate  paper  which 
covers  also  the  financial  details  of  the  company.  The 
original  patent  papers,  with  verified  copies  of  possible 
assignments,  contracts,  etc.,  accompany  the  pros- 
pectus; also  a  validity  report.  The  opinion  of  the 
patent  attorneys  through  whom  the  patent  was  ob- 
tained, would  also  be  of  some  importance.  If  the 
invention  is  being  exploited  by  a  going  concern,  this 
fact  should  be  adequately  stated.  If  the  enterprise 
has  proceeded  beyond  the  experimental  stage,  this 
should  appear.  If  the  enterprise  has  been  profitable 
for  a  number  of  years,  a  statement  showing  the  receipts, 
expenditures,  and  net  profits  should  be  prepared,  and 
the  prospectus  should  bring  it  out  clearly;  moreover, 
it  should  be  verified  by  the  certificate  of  an  auditor. 
The  nature  of  the  trade  in  patented  things  should  be 
explained  and  the  reason  for  believing  that  the  revenue 
therefrom  can  be  increased. 


CHAPTER  XV 
METHODS  OF  MAKING  SALES 

A  CONSIDERATION  of  plans  and  methods 
for  perfecting  a  sale  of  a  patented  invention 
or  otherwise  disposing  of  it  is  now  in  order. 
It  is  evident  that  any  method  of  disposing  of  one's 
invention  presupposes  the  existence  of  agencies  and 
parties  interested  in  the  pushing  of  inventions.  The 
easiest  way  in  which  to  cooperate  with  these  agencies 
will  engage  our  attention  first.  If  the  inventor  is  of 
a  scientific  turn  of  mind  and  young,  training  in  the 
higher  branches  of  mechanical  application  and  re- 
search, which  at  the  same  time  assures  reward  for 
invention,  is  the  sine  qua  non.  Unfortunately  there 
are  few  agencies  where  men  may  be  trained  to  invent 
and  where  their  inventions  are  taken  up  and  pushed. 
One  must  attain  success  by  regular  stages.  But 
during  the  war  a  good  beginning  was  made.  Canada 
stands  first  to-day  among  countries  whose  citizens 
are  red-blooded  enough  to  try  new  inventions.  It 
is  not  surprising,  therefore,  that  the  Canadian  Parlia- 
ment recently  appropriated  many  thousands  of  dol- 
lars to  establish  the  Bureau  of  Industrial  and  Scientific 
Research.  The  plan  includes  the  selection  of  uni- 
versity students  who  show  an  aptitude  for  investigation 
along  certain  lines,  allowing  them  $600  the  first  year 
and  $750  the  second  year.  Subsequently  they  may 
either  continue  their  investigations  at  college  or  be 

125 


126  Sale  of  Inventions 

transferred  to  industrial  plants  to  make  practical 
application  of  their  ideas. 

One's  article  must  be  of  great  merit  in  order  that 
one  may  be  in  a  position  to  choose  any  of  several 
plans,  some  better  than  the  others.  It  is  compara- 
tively easy  to  get  mechanisms  to  produce  an  effect, 
but  it  is  difficult  to  devise  the  best  mechanism  for  the 
purpose,  the  simplest  mechanism,  the  most  direct- 
acting,  the  mechanically  proper  mechanism.  A  nearly 
perfect  invention  will  bring  other  inventions  to  a 
full  stop. 

Recognizing  the  fact  that  the  hardest  part  of  the 
task  of  introducing  the  invention  into  favorable  public 
notice  is  to  get  the  thing  used  and  tried,  personal 
demonstration  is  suggested.  Many  articles,  such  as 
toilet  preparations,  smokers'  articles,  etc.,  may  be 
demonstrated  in  store  show  windows,  either  in  depart- 
ment stores  or  elsewhere.  In  this  way  an  invention 
may  be  put  in  large  letters  before  the  public. 

Demonstration  is  also  a  good  policy  whenever  it  is 
proposed  to  show  the  merits  of  any  small  article,  — 
what  it  does  and  how  it  does  it.  In  all  such  cases, 
what  counts  is  the  exhibition  of  the  article  to  crowds 
of  people  who  watch  the  exhibitor's  movements  in 
the  window  and  concentrate  upon  the  particular  article 
he  demonstrates  to  the  exclusion  of  other  articles  or 
things.  In  a  department  store  there  is  usually  a  large 
number  of  things  which  attract  the  observer's  atten- 
tion at  the  same  time.  But  out  in  the  street  the  ob- 
server has  his  eyes  receptively  open  to  what  the  dem- 
onstrator is  exhibiting.  An  appreciation  of  differences 
will  be  keener. 

The  reader  may  know  quite  a  few  articles  which 


Methods  of  Making  Sales  127 

have  been  started  fairly  on  the  market  in  this  way. 
An  inventor  of  a  novel  shaving  brush,  having  a  soap 
fountain  as  a  portion,  demonstrated  it  by  renting 
the  windows  of  the  best  located  druggists  in  several 
cities  in  succession  and  exhibiting  the  article  in  the 
show  windows  before  large  crowds  of  people.  The 
arrangement  he  made  with  the  owner  of  the  drug 
store  was  mutually  satisfactory.  The  article  was 
one  of  merit,  and  the  druggist  recognized  this  merit. 
The  thing  was  sold  over  the  counters  in  the  drug  store 
and  from  the  very  start  was  a  great  success.  Many, 
spurred  on  by  the  demonstration,  purchased  the 
article.  Selling  such  articles  almost  at  cost  is  often 
a  good  way  in  which  to  boost  the  sale  in  the  beginning. 
One  then  depends  upon  the  continued  use  of  the  article 
by  the  purchaser  and  its  recommendation  by  him  for 
ultimate  profit.  The  recommendation  of  a  satisfied 
user  is  a  big  boost  for  any  article.  This  opportunity 
of  exploitation  should  not  be  allowed  to  lapse. 

If  any  one  has  started  a  business  of  his  own  for 
making  and  selling  his  invention,  and  wishes  to  gain 
notoriety  by  leaps  and  bounds,  let  him  exhibit  his 
invention  at  an  Industrial  Exposition.  Hire  a  booth 
and  place  suitable  display  cards  for  public  inspection. 
There  are  certain  trade  exhibitions  or  expositions,  as 
they  are  called,  held  periodically  in  different  cities  where 
various  devices  are  advantageously  displayed.  It 
is  very  effective  as  a  direct  means  of  bringing  the 
merits  of  patented  articles  before  the  attention  of  a 
large  number  of  likely  users  and  is  an  easy  way  to  get 
a  footing. 

In  other  words,  the  inventor  must  use  his  best 
business  judgment,  the  same  as  he  would  if  he  were 


128  Sale  of  Inventions 

engaged  in  any  mercantile  activity.  If  things  look 
a  little  promising,  newspaper  advertising  should  be 
used.  As  the  sales  increase,  this  may  also  be  in- 
creased. Great  care  should  be  used  in  selecting  the 
newspapers.  Consult  an  advertising  man  about  this. 
Thus  by  proceeding  cautiously,  one  step  at  a  time 
on  the  right  path,  the  inventor  can  eventually  build 
up  a  lucrative  business,  a  business  that  will  be  prac- 
tically a  monopoly.  Sometimes  we  have  seen,  as  in 
the  case  of  a  new  food  cereal,  that  the  way  to  start 
a  market  for  an  article  is  to  give  away  some  free  samples 
of  it.  The  newspapers  can  be  used  for  free  reading 
notices.  In  the  smaller  towns  of  the  country  the  local 
newspaper  publishers  are  eager  to  print  all  the  news. 
Consequently,  when  one  of  the  residents  of  the  town 
gets  a  patent,  the  publisher  will  usually  be  only  too 
glad  to  print  news  articles  about  the  invention.  All 
this  goes  to  advertise  it.  In  fact,  it  is  the  very  best 
kind  of  advertising.  It  should  be  obtained  even  if  the 
publisher  should  require  pay  for  it,  for  the  chances 
are  that  other  newspapers  will  copy  the  article  and  thus 
spread  the  news  of  the  invention  broadcast.  News 
will  spread  about  the  merits  of  the  device,  if  it  is 
what  it  is  claimed,  and  reprints  may  be  as  quick  as  a 
lamplighter  in  bringing  prospects. 

When  the  inventor  finds  himself  in  a  position  to 
dispose  of  his  invention  outright  or  on  a  royalty  basis 
and  when  he  can  show  that  the  success  of  his  invention 
is  assured  and  not  merely  something  problematic,  then 
"feeling  out  the  pulse"  of  the  buying  public  is  the  next 
best  plan.  It  requires  no  trick  of  fortune  to  do  this. 

If  the  device  is  very  simple  in  its  construction,  a 
number  of  articles  should  be  made  and,  if  possible, 


Methods  of  Making  Sales  129 

sold  to  the  most  prominent  people  at  hand  who  would 
have  use  for  them.  After  they  have  used  them,  the 
writer  should  visit  them  in  person  and  endeavor  to 
get  written  testimonials  endorsing  the  article  and 
setting  forth  its  advantages.  By  using  a  little  di- 
plomacy he  can  get  the  desired  testimonials.  These 
should  be  printed  in  a  neat  small  circular.  In  this 
circular,  give  a  clear,  concise  description  of  the  article 
together  with  good  cuts  showing  it.  State  the  price. 
Too  much  care  cannot  be  taken  with  the  printed  matter. 
In  most  cases  it  is  best  to  engage  a  competent  person 
to  prepare  the  copy.  Neat  letter  heads  should  be 
printed,  also  envelopes  and  labels.  By  sending  out 
circulars  in  this  way,  following  them  up  with  a  personal 
canvass  of  prospects,  the  inventor  can  gain  some  idea 
as  to  the  reception  his  invention  is  to  have  at  the  hands 
of  the  public.  If  the  results  flowing  from  such  steps 
should  prove  encouraging,  the  inventor  should  not 
permit  the  hope  of  great  and  immediate  gain  to  over- 
come his  good  judgment.  Otherwise  he  may  fish 
in  troubled  waters.  He  should  exercise  his  enthusiasm 
in  his  invention,  but  in  the  expenditure  of  money  he 
should  be  extremely  cautious  and  ever  bear  in  mind 
that,  for  the  present  at  least,  he  is  simply  feeling  the 
pulse  of  the  public  and  that  it  would  be  well  for  him 
to  wait  and  consider  before  becoming  heavily  involved. 

One  should  pay  much  attention  to  the  letter  heads 
and  to  the  form  and  appearance  of  the  sales  letter  he 
sends  out  to  influence  people.  One  should  use  only 
the  best  paper  and  get  the  printing  done  well.  Use 
plain  English  words.  Every  letter  should  be  clear, 
courteous,  to  the  point,  and  should  meet  one's  wishes 
as  to  fullness.  When  one  writes  the  sales  letter,  he 


130  Sale  of  Inventions 

should  not  give  the  idea  from  the  tone  of  it  that  he 
has  something  to  sell;  he  should  not  let  his  prospect 
know  that  he  is  simply  after  his  money.  Make  him 
forget  there  is  a  cost  attached.  Use  a  little  persua- 
sion and  tell  him  that  he  needs  the  new  article  and 
show  him  why.  Always  talk  for  his  interests,  never  for 
anybody  else's. 

Again  it  is  emphasized  that,  if  practicable,  it  is 
always  better  to  exploit  an  invention  through  a  new 
concern  than  through  an  established  manufacturer. 
As  experience  has  shown,  one  can  obtain  much  better 
terms  in  this  way,  because,  with  a  manufacturer's 
firm,  the  invention  is  only  one  of  its  interests  and  is 
apt  to  be  neglected,  or  otherwise  pass  out  of  one's 
hands. 

An  inventor  may  dispose  of  his  invention  by  straight 
assignment,  by  royalty  or  license,  by  geographical  or 
territorial  rights,  or  by  shop  rights. 

The  straight  assignment  of  the  whole  right  in  a 
patent  for  a  cash  consideration  is  a  simple  matter; 
but  the  assignment  of  undivided  interests  and  the 
granting  of  territorial  rights  have  sometimes  caused 
the  parties  concerned  endless  trouble,  especially  when 
they  have  stood  behind  a  screen.  An  assignment  of 
a  patent  becomes  necessary  when  one  sells  an  inven- 
tion outright.  This  is  an  excellent  plan  if  the  inven- 
tion is  good  and  admits  of  being  sold  outright.  By 
this  plan  one  cannot  realize  as  much  as  one  can  by 
remaining  interested  in  the  invention  and  making 
part  of  the  compensation  contingent  upon  success, 
because  the  large  risks  taken  by  the  manufacturer 
necessarily  require  a  large  return.  The  article  the 
manufacturer  buys  to-day  for  $1000  might  be  sold 


Methods  of  Making  Sales  131 

by  him  the  next  year  to  another  manufacturer  for 
$10,000  and  by  the  latter  in  the  following  year  to  a 
third  manufacturer  for  $100,000.  It  shows  the  great 
and  rapid  increment  of  value  attained  by  patents  as 
the  sales  under  them  increase. 

The  assignor  of  the  assignment  is  the  party  making 
it,  and  the  assignee  is  the  party  to  whom  the  assign- 
ment is  made.  To  give  the  purchaser  of  a  patent 
legal  title,  the  patentee  is  required  to  sign  a  deed  of 
assignment.  This  is  usually  prepared  at  the  expense 
of  the  purchaser  and  has  to  be  registered  in  the  United 
States  Patent  Office.  The  patentee  should  be  cautious 
in  signing  the  deed  put  before  him,  as  the  wording 
may  commit  him  to  guaranties  which  he  did  not 
intend.  The  assignment  should  state  whether  it 
covers  all  the  patent  rights  of  the  invention  in  the 
home  countries  only,  or  those  in  all  foreign  countries 
as  well;  also,  whether  the  rights  conveyed  pertain 
to  all  patents  for  it  or  merely  to  the  particular  patent 
recited;  also  whether  the  assignment  covers  all  im- 
provements on  the  invention  and  how  far  these  im- 
provements are  to  be  included. 

Suppose  the  subject  related  to  a  paper  box  making 
machine.  It  should  be  clearly  understood  and  stated 
whether  the  assignment  covers  merely  the  patent  for 
the  machine  then  pending  or  for  other  substitutes  and 
divisional  patents  as  well,  and  if  it  covers  improve- 
ments; also  whether  by  this  term  is  meant  merely 
improvements  coming  under  and  dominated  by  the 
claims  of  the  patent,  or  all  improvements  in  that  type 
of  paper  box  machine  only,  or  improvements  in  any 
type  of  paper  box  machine,  or  improvements  in  all 
box  machines,  whether  for  paper  boxes  or  metal  boxes. 


132  Sale  of  Inventions 

Failure  to  mention  these  features  may  lead  to 
quarrels  and  to  expensive  litigation.  To  protect  the 
assignee,  the  assignment  should  state  that  the  assignor 
is  ready  to  execute  such  new  instruments  as  may  be 
found  necessary  to  carry  out  the  expressed  intent  of 
the  original  assignment. 

By  means  of  an  assignment  one  may  dispose  of  the 
entire  interest  or  title  in  a  patent,  either  for  the  entire 
country  or  any  part  thereof;  but  when  one  leases 
the  use  of  an  invention,  he  is  not  granting  away  the 
title  at  all.  We  are  now  merely  discussing  the  formal 
aspects  of  transfers  of  interest  in  patents.  Soon  we 
shall  approach  the  question  of  what  actually  goes  to 
the  party  to  whom  a  particular  transfer  of  a  patent 
will  have  been  made. 

Few  inventors  realize  the  advantage  which  leasing 
an  invention  possesses  over  a  direct  transfer  of  title 
by  means  of  an  assignment.  By  this  plan  the  in- 
ventor agrees  with  the  manufacturer  to  take  a  per- 
centage of  his  profits  in  consideration  for  transferring 
his  patent  rights.  A  cash  sum  may  be  paid  in  addi- 
tion. The  royalty  may  be  reckoned  in  many  ways; 
it  may  be  a  flat  sum  per  article  —  so  much  per  piece, 
per  gross,  or  per  thousand  —  or  it  may  be  a  percent- 
age of  the  regular  selling  price  of  the  article,  or  a  per- 
centage of  the  net  profit  on  it  or  on  the  difference 
between  the  selling  price  and  the  cost  of  manufacture. 
It  may  vary  upward  or  downward  as  manufacturing 
increases  or  decreases  from  year  to  year  and  in  a  single 
or  complex  ratio.  It  may  be  reckoned  on  the  articles 
manufactured  during  each  royalty  period,  or  on  those 
sold,  or  on  those  not  merely  sold  but  actually  delivered 
and  paid  for. 


Methods  of  Making  Sales  133 

The  inventor  should  not  forget  this,  otherwise  a 
shrewd  party  will  take  unreasonable  advantage  of 
him.  It  may  be  added  that  attorneys  who  are  not 
experienced  in  this  line  of  work  are  as  apt  to  miss  the 
point  as  the  inventor  is.  In  fact,  even  an  experienced 
attorney  has  difficulty  in  anticipating  every  possible 
contingency,  however  vigilant  he  may  be. 

A  contract  of  this  sort  or  any  sort  which  does  not 
call  for  immediate  execution  in  full  by  both  parties, 
but  is  expected  to  be  in  force  over  a  period  of  years, 
must  of  necessity  be  a  long  one  in  order  to  secure 
what  it  ought  to  secure  to  the  benefit  of  the  patentee 
by  providing  against  these  unforeseen  contingencies. 
In  royalty  contracts  some  manufacturers  base  the 
amount  of  royalty  on  the  estimated  profits  which  will 
accrue  eight  years  after  the  patent  is  granted,  that  is, 
when  the  patent  protection  is  about  half  expired. 

If  a  royalty  contract  does  not  provide  for  a  con- 
siderable amount  of  cash  down,  it  should  provide  for 
a  minimum  annual  payment,  e.g.  $500  on  account  of 
royalty,  which  not  only  secures  the  inventor  a  sub- 
stantial income  but  is  also  a  pledge  of  good  faith  on 
the  part  of  the  manufacturer. 

The  great  advantage  of  royalty  contracts  is  that 
the  inventor  does  not  sign  away  his  rights  irrevocably, 
but  that,  on  the  contrary,  they  automatically  revert 
to  him.  Consequently  he  does  not  have  to  sue  at 
law  for  damages  or  to  have  the  rights  restored  to  him. 
Including  the  delays  with  appeals,  legal  actions  are 
not  only  costly  but  altogether  destructive  of  reward 
for  meritorious  invention.  Again,  such  contracts  do 
not  depend  on  the  solvency  of  any  of  the  parties. 
The  really  serious  and  able  manufacturer  has  no  hesi- 


134  Sale  of  Inventions 

tancy  to  enter  into  such  a  contract,  as  it  involves  no 
disadvantage  to  him  as  long  as  he  fulfills  his  engage- 
ment. Should  the  invention  prove  unsuccessful,  he 
has  the  right  to  allow  the  contract  to  lapse  and  will 
not  be  responsible  for  further  royalties. 

One  may  assign  outright  in  any  territory,  or  one 
may  grant  an  exclusive  license  effective  in  any  given 
territory.  A  country  can  be  divided  up  into  a  num- 
ber of  sections  and  the  rights  of  each  section  sold  or 
leased  to  a  different  firm.  This  is  a  good  mode  only 
in  cases  where  there  are  many  factories  and  where 
the  trade  of  each  is  circumscribed.  But  the  advan- 
tages of  so  dealing  are  very  great  because  one  can 
often  get  as  much  from  one  section  as  one  could  by 
licensing  the  whole  country  and  still  have  the  profits 
of  the  other  sections.  Again,  if  the  inventor  be  suc- 
cessful in  one  section,  he  should  have  little  difficulty 
in  selling  rights  in  the  remaining  section. 

Shop  rights  do  not  as  a  rule  call  for  much  discussion. 
Quite  a  few  may  be  sold  either  by  active  work  of  the 
inventor  or  of  his  agents.  When  an  invention  is  sold 
in  this  way,  it  becomes  unsalable  as  a  whole  because 
there  exists  no  monopoly  in  it.  Still  it  is  the  only 
way  in  which  some  inventions  can  be  handled,  es- 
pecially shop  processes;  e.g.,  a  process  for  gold  ex- 
traction that  could  not  be  monopolized  advantageously 
by  any  firm.  Beware  of  making  any  assignment  of  a 
patent  unless  it  leads  to  the  introduction  of  the  in- 
vention into  the  market  as  opposed  to  obtaining,  money 
with  which  to  patent  the  invention.  If  the  inventor 
has  a  little  money,  it  is  best  to  employ  it  in  patenting 
rather  than  to  spend  it  in  promoting,  especially  where 
it  is  necessary  to  part  with  an  interest  in  a  patent  in 


Methods  of  Making  Sales  135 

order  to  get  the  money  to  file  the  application.  But 
if  he  is  to  give  an  interest  in  the  patent  to  secure  this 
money,  let  it  cover  a  sufficient  amount  not  only  to 
take  out  the  patent  but  to  build  models,  make  experi- 
ments, and  test  out  the  invention  on  a  commercial 
scale.  He  should  figure  on  at  least  $250  to  $500  in 
most  cases.  If  he  does  not  do  this,  he  may  have  to 
part  with  another  interest  in  the  patent  after  the 
patent  is  issued  in  order  to  secure  funds  to  make  a 
working  model;  thus  he  will  have  nothing  left  for 
himself. 

The  reader  having  now  been  informed  of  the  various 
ways  in  which  he  may  dispose  of  a  patent,  the  interest 
conveyed  will  now  be  considered.  When  one  finds 
an  investor  interested  in  an  invention,  one  must  know 
the  exchange  value  of  an  assignment,  in  return  for  the 
patent  rights  conveyed.  One  knows  how  much  money 
to  give  when  a  certain  price  is  asked  for  a  certain 
article  he  buys,  and  now  he  must  know  what  interest 
in  his  patent  he  should  give  in  exchange  for  a  certain 
sum  of  money  or  other  benefits. 

One  may  grant  a  divided  or  undivided  interest  in  a 
patent.  The  nature  of  a  patent  property  has  already 
been  explained.  An  undivided  interest  without  re- 
striction is  an  assignment  which  is  unfavorable  to  the 
inventor  and  should  be  avoided,  for  unless  the  assign- 
ment provides  for  the  contrary,  the  owners  become 
tenants  in  common  and  are  therefore  at  each  other's 
mercy.  Each  may  use,  or  license  others  to  use,  the 
patent  without  the  consent  of  his  associates  and 
without  any  responsibility  to  the  other  joint  owners 
for  the  profits  arising  from  such  license. 

Any  joint  owner  could  license  a  foreign  manufacturer 


136  Sale  of  Inventions 

to  sell  the  product  in  this  country.  Each  can  manu- 
facture without  restriction.  If  an  inventor  sells  even 
a  small  interest  in  an  invention,  the  owner  of  this 
small  amount  has  all  rights  of  the  one  or  several  owners 
of  the  balance. 

Would  the  reader  like  to  overcome  the  objectionable 
features  of  a  joint  ownership?  This  can  be  done  by 
forming  a  corporation,  the  patentee  assigning  his 
patent  for  a  certain  portion  or  percentage  of  stock,  or 
under  an  agreement  in  which  the  holders  of  a  joint 
interest  cannot  sell  without  consent;  also  by  putting 
the  title  in  the  hands  of  a  trustee.  The  owner  of  a 
part  interest  cannot  be  compelled  to  join  with  the 
other  owners  in  order  to  enable  the  sale  of  the  whole 
interest  to  be  made.  This  would  enable  one  joint 
owner  to  prevent  the  sale  of  the  whole  interest  and 
to  hold  up  the  other  owners  for  an  exorbitant  price 
for  his  share. 

The  assignment  records  of  the  Patent  Office  show 
many  instances  where  a  percentage  division  retaining 
over  fifty  per  cent  indicated  that  the  buyers  or  sellers 
expected  to  retain  control.  Cases  are  common  where 
the  inventor  will  hold  more  than  half  and  sell  the 
balance  to  others,  presuming  thereby  he  has  retained 
control.  In  this  view  he  is  mistaken. 

It  is  submitted  that  in  putting  the  patent  to  work, 
the  first  consideration  will  be  to  select  the  class  of 
persons  to  whom  the  public  use  of  the  invention  would 
bring  the  most  pecuniary  profits.  Such  a  class  will 
usually  be  made  up  of  the  manufacturers  of  similar 
goods,  because  they  are  already  equipped  with  suit- 
able means  to  handle  the  invention. 

Before  one  is  in  a  position  to  judge  what  form  of 


Methods  of  Making  Sales  137 

transfer  he  should  make,  he  must  know  who  the  most 
likely  prospects  are  and  how  to  prepare  lists  of  them 
so  that  he  may  select  the  best  names.  It  is  also  essen- 
tial to  understand  the  contractual  relationships  and 
mutual  rights  between  the  inventor  and  investor. 
This  subject  will  be  treated  elsewhere. 

We  cannot  close  this  chapter  on  methods  of  making 
sales  of  patents  without  a  word  about  preparing  mail- 
ing lists,  a  factor  of  prime  importance  in  advertising. 
We  read  every  day  of  big  mail  order  successes.  Mail- 
ing lists  have  produced  fortunes  for  many  business 
men.  A  publisher  sold  over  a  million  dollars'  worth 
of  books  through  a  medium  of  carefully  selected 
names.  A  wholesaler  placed  a  new  brand  of  goods 
in  record  time  and  at  unbelievably  low  cost  by  the 
use  of  mailing  lists. 

No  salesman  would  submit  his  proposition  hap- 
hazard to  every  one  in  his  territory  irrespective  of 
his  line  of  business  and  purchasing  power.  He  applies 
the  principle  of  selection.  When  compiling  a  list  of 
names  of  prospects,  one  must  do  the  same  thing.  In 
each  case  one  must  ask  oneself,  "  Is  this  man  a  live 
prospect?  " 

The  Addressograph  Company,  in  a  book  published 
by  them  entitled,  "  The  Preparation  and  Care  of 
Mailing  Lists,"  has  charted  in  an  admirable  way 
the  sources  of  names  of  prospects.  Consider  the 
names  of  some  directories,  such  as  the  telephone 
directories  of  various  cities,  Brown's  Directory  of 
American  Gas  Companies,  McGraw's  Directory  of 
Gas  and  Electric  Light  and  Electric  Railway  Com- 
panies, and  Thomas'  Directory  of  American  Manu- 
facturers. 


138  Sale  of  Inventions 

SOURCES  OF  NAMES  OF  PROSPECTS 

Directories. 

Local:    City,  telephone,  blue  book. 
National:    Rating  books,  trade  directories. 
Government  Records. 

Municipal:    City  tax  lists,  permit  records,  license 

records,  marriage  records,  building  permits. 
County  and  State:    Registration  lists,  county  tax 

lists,  secretary  of  state  records,  labor  reports. 
National:  Income  tax  lists,  labor  records. 
Organizations. 
Business:  Commercial  clubs,  advertising  clubs,  civic 

organizations. 

General:  Fraternal,  labor,  and  social. 
Advertising. 

Magazines,  newspapers,  and  trade  journals. 
Press  Clippings. 

Names  of  advertisers,  society  notes,  fires,  removals, 
real  estate,  business  changes,  new  incorporations. 
Miscellaneous. 

Employees  of  local  concerns,  exchanging  lists  with 
other  concerns,  addressing  companies,  salesman's 
reports,  investigators,  R.F.D.  carriers,  customers, 
delivery  men,  bank  cashiers,  justices  of  the  peace, 
country  editors,  and  dealers. 

Governmental  records  are  a  fruitful  source  of  val- 
uable names.  The  city  clerk  of  any  city  will  tell 
one  what  records  to  consult.  It  is  not  part  of  the  city's 
business  to  supply  these  lists  of  names,  but  the  city 
officials  are  at  all  times  ready  to  give  any  responsible 
individual  access  to  their  classified  records.  Ap- 
proach city  as  well  as  R.F.D.  mail  carriers  when 


Methods  of  Making  Sales  139 

they  are  off  duty.  One  can  get  farmers'  names, 
information  about  whether  a  fanner  is  a  renter  or 
an  owner,  how  many  acres  he  farms  or  owns,  etc. 
Postmasters  are  allowed  by  law  to  verify  lists  of  names 
and  to  cross  out  "  dead  "  names.  If  one  takes  ad- 
vantage of  this,  he  must  enclose  return  postage  for  the 
list.  Postmasters  will  not,  however,  add  any  more 
names  to  the  list.  A  good  list  to  obtain  from  an 
addressing  company  is  a  list  of  stockholders  in  com- 
panies already  organized,  men  who  have  already 
been  successfully  approached.  One  can  get  samples 
of  such  circulars  by  reading  the  printed  matter  usually 
obtained  by  answering  the  "  ad "  in  any  financial 
or  investment  paper. 


CHAPTER  XVI 
CLOSING  WITH  INVESTORS 

IN  the  next  few  chapters  dealing  with  confidential 
matters  it  will  be  presumed  that  the  reader  is 
closeted  with  the  author  considering  personal 
advice.  In  exploiting  inventions,  as  in  everything 
else,  it  is  the  last  step  that  wins.  The  last  step  and 
the  most  important  is  to  "  close  "  successfully  with 
the  prospective  investor.  It  is  first  necessary  to  get 
in  touch  with  him.  By  advertising  you  can  get  the 
quickest  results.  To  get  started  on  the  road  to  suc- 
cess, you  need  a  factory.  And  to  get  it,  you  will 
place  an  "  ad  "  in  the  papers  for  capital,  get  the  replies, 
locate  the  investors  by  telephone  numbers  or  street 
address,  and  determine  by  reading  the  letters  which 
ones  would  be  most  suitable  for  your  purpose.  Have 
in  view  some  location  for  your  factory  or  salesrooms. 
The  next  thing  to  do  is  to  see  your  landlord,  the  one 
of  whom  you  expect  to  rent  the  place.  Explain  to 
him  that  you  are  to  bring  to  him  the  man  who  is 
to  pay  the  rent.  Make  an  appointment  with  him  to 
see  him  at  the  place  at  the  right  time,  the  same  or 
the  next  day  (depending  upon  how  far  away  your 
investor  lives  and  the  number  of  favorable  replies 
received) .  Then  call  on  your  prospect  and  tell  him  you 
want  him  to  go  and  look  at  the  proposed  location. 
Do  not  spend  much  time  with  him  and  do  not  argue 
about  the  merits  of  your  enterprise. 

140 


Closing  with  Investors  141 

Meet  him  and  take  him  to  see  the  landlord.  Intro- 
duce him  to  the  landlord  and  trust  the  landlord  to 
get  a  deposit  on  the  rent  or  at  least  to  get  the  lease 
signed.  Do  not  be  too  anxious  to  hear  all  they  say. 
Before  long  you  will  see  them  bargaining  with  each 
other.  They  will  both  lose  sight  of  you  temporarily. 
The  investor  will  sooner  put  out  some  money  for  rent 
than  put  some  money  away  in  the  bank  for  you. 

You  have  now  reached  the  point  where  it  is  neces- 
sary so  to  influence  the  investor  that  he  will  settle 
preliminaries.  It  is  necessary  to  know  what  counts 
in  influencing  capital  irrespective  of  those  who  are 
to  direct  this  influence.  When  you  approach  the 
investor  to  increase  his  income  with  a  sound  proposi- 
tion, you  are  doing  him  one  of  the  greatest  favors 
one  man  can  do  for  another.  Strive  to  get  him  inter- 
ested in  making  some  initial  advance  for  the  good 
of  your  mutual  undertaking  so  as  to  see  him  act  in 
good  faith.  Having  placed  the  investor  under  an 
obligation,  you  are  then  ready  to  get  the  lease  signed. 
Then  you  can  talk  about  some  form  of  contract  and 
call  in  a  lawyer. 

People  are  usually  influenced  through  one  of  the 
three  following  factors:  (i)  by  the  use  of  the  eyes, 
(2)  by  the  use  of  the  hands,  (3)  by  the  voice.  You 
may  use  all  of  these  organs  whether  consciously  or 
not.  You  have  a  definite  purpose  in  mind  in  bring- 
ing your  prospect  together  with  the  landlord.  More 
dollars  change  hands  every  day  as  a  result  of  per- 
sonalities, friendships,  feelings,  and  emotions  than 
for  any  other  reason.  You  must  aim  to  place  your 
investor  in  such  a  position  that  he  cannot  easily  retire 
without  damage  to  his  feelings.  Discipline  him  to 


142  Sale  of  Inventions 

the  merits  of  your  invention.  That  is  the  reason  you 
want  to  link  up  the  investor  with  some  supply  or 
fixture  man.  Remember  "  you  can  drive  a  mule  to 
water,  but  you  cannot  make  him  drink."  It  is  just 
that  way  with  investors.  You  must  make  the  in- 
vestor feel  that  by  putting  down  the  money  to  start 
the  invention,  he  is  doing  himself  the  best  turn  in 
the  world.  Be  open-hearted  about  it.  He  must  do 
it  of  his  own  free  will  and  accord,  and  such  a  frame 
of  mind  can  be  brought  about  only  by  the  use  of 
proper  suggestions. 

Size  up  your  prospect  whether  he  is  a  conservative 
or  a  radical.  From  your  angle  it  is  a  question  of 
money  and  how  freely  the  investor  spends  it.  One 
novel  way  in  which  to  size  up  your  prospect  is  to  ask 
him  a  few  side  questions.  If  your  prospect  is  a  little 
conservative,  if  it  took  him,  like  yourself,  a  long 
tune  to  accumulate  a  little  money,  do  not  pile  up  the 
profits  too  fast.  He  judges  life  by  his  own  experi- 
ence. Let  him  talk,  and  see  if  he  tells  you  his  ideas 
of  money-making.  He  may  be  full  of  incident.  In 
this  way  you  can  tell  whether  he  is  an  enthusiast. 
You  will  see  at  a  glance  whether  he  will  put  the  profit 
in  the  savings  bank  or  will  buy  an  automobile,  that 
is  the  main  difference  between  a  conservative  and  a 
radical.  You  are  now  ready  to  bring  the  landlord 
and  your  prospect  together  for  the  purpose  of  getting 
the  payment  of  actual  money.  All  this  is  practical 
psychology,  as  clever  use  is  made  of  suggestion. 

Understand  the  psychology  of  inspiring  confidence. 
First  of  all,  talk  about  rents,  machinery,  and  so  forth. 
The  amount  of  machinery  you  need  and  the  cost  there- 
of you  can  get  from  dealers  in  machinery.  When 


Closing  with  Investors  143 

you  show  these  figures  to  the  investor,  it  looks  like 
business. 

Talk  economy  all  the  time,  especially  when  talking 
of  fixtures.  The  probable  receipts  and  expenses  for 
the  first  year  of  the  undertaking  are  to  be  considered 
together.  Every  great  idea  goes  through  three  stages. 
First,  people  say  it  conflicts  with  the  Bible;  next, 
they  say  it  was  discovered  before;  lastly,  they  say 
they  always  believed  it. 

You  may  not  have  to  use  speech  to  influence  your 
prospect.  Perhaps  your  model  will  win  him  over. 
Your  model  should  be  neat,  well  made,  and  as  busi- 
nesslike as  possible.  Do  not  underestimate  this. 
A  rickety  model  tied  with  strings  and  loose  at  the 
joints  may  demonstrate  the  principle  beyond  question. 
But  suppose  that  in  doing  so  the  model  breaks  down 
once  or  twice  or  a  joint  becomes  uncoupled  or  a  string 
untied.  The  exhibition  then  will  have  to  wait  until 
due  repairs  are  made  and  your  nervousness  is  over- 
come. In  the  meantime  the  man  with  the  money 
concludes  that  the  thing  will  not  work.  In  the  minds 
of  those  looking  at  an  invention,  the  character  of  the 
model  has  much  weight.  Better  make  the  model 
neat,  then  you  will  have  no  trouble  with  it. 

You  must  not  only  influence  your  prospect  to  think 
with  you,  but  to  take  some  definite  action  as  a  result 
of  your  representation.  By  getting  him  to  pay  the 
rent,  or  pay  for  a  supply  of  fixtures,  etc.,  you  prac- 
tically tie  him  up  so  that  he  must  act.  The  majority 
of  people  interviewing  a  prospect  make  it  too  easy 
for  him  to  slip  away. 

Sometimes  you  must  offer  special  inducements.  By 
all  means,  do  not  forget  what  has  already  been  said 


144  Sale  of  Inventions 

about  the  essentials  of  a  good  enterprise.  They  may 
be  thus  summed  up:  (i)  A  sound  undertaking,  (2) 
sufficient  capital,  (3)  efficient  management.  In  other 
words,  you  must  know  how  "  to  cut  through  the  ice." 
The  easiest  way  is  to  get  in  touch  with  a  prospect 
who  is  a  good  salesman  and  merchandising  man.  This 
will  not  keep  a  prospect  from  setting  up  a  factory 
with  his  money  or  by  the  help  of  the  money  of  others. 
It  must  be  reiterated  that  when  you  are  selling  shoes, 
there  is  a  ready  and  acceptive  market  for  shoes  before 
you  manufacture  them,  but  when  you  take  a  patented 
article  of  which  the  public  knows  nothing  and  you 
start  to  sell  that  patented  article,  you  are  confronted 
with  a  different  problem.  You  have  got  to  persuade 
the  other  man  to  whom  you  hope  to  sell  that  this 
something  he  has  never  used  before  is  a  good  thing. 
It  may  cause  a  revolution  of  his  habits  or  it  may 
cause  a  revolution  of  something  else;  you  have  got 
to  overcome  that  resistance.  The  man  who  handles 
a  patented  piece  of  merchandise  is  entitled  to  name 
the  price,  because  if  that  valuable  invention  is  to  be 
distributed  throughout  the  country,  so  that  con- 
sumers will  get  the  benefit,  you  have  got  to  do  those 
things  which  will  enable  the  manufacturer  to  build  a 
sufficient  distributive  organization.  How  can  a  very 
good  thing  that  you  invent  get  to  a  man  in  Florida, 
California,  or  elsewhere  unless  there  are  at  hand  those 
necessary  means  by  which  the  manufacturer  can 
handle  the  selling  organization? 

Let  us  be  men  and  women  of  action;  let  us  say, 
"  I  can,  I  must,  I  will."  The  further  the  inventor 
pursues  his  enterprise,  the  better  for  the  inventor, 
provided  he  does  not  stop  at  any  position  from  which 


Closing  with  Investors  145 

he  can  neither  advance  or  retreat.  You  will  under- 
stand why  it  is  best  to  leave  out  the  question  of  your 
salary  from  the  initial  discussion  of  plans.  It  is  a 
bitter  pill  for  the  investor  to  swallow.  Leave  this 
proposition  for  a  later  time  when  you  have  the  propo- 
sition well  under  way. 

When  the  investor  pays  the  rent  or  gives  security 
for  such  payment,  his  attitude  toward  you  will  change. 
He  will  realize  at  once  that  he  and  you  are  partners. 
He  will  make  appointments  with  you  to  get  the  stock, 
begin  manufacturing,  etc.  Then  you  will  find  op- 
portunity to  discuss  how  profits  are  to  be 'divided. 
If  your  proposition  calls  for  less  than  $10,000,  you 
may  be  entitled  to  half  and  you  might  be  foolish  to 
accept  less.  Do  not  let  any  one  get  a  dominating 
share  of  the  business.  The  idea  is,  if  you  work  regu- 
larly, you  get  paid.  If  he  helps,  he  gets  paid.  This 
plan  is  excellent.  If  an  investor  will  not  even  pay 
the  rent,  how  can  you  expect  him  to  lay  aside  a  certain 
sum  of  money  in  the  bank?  Business  is  business; 
rent  is  not  only  necessary  but  reasonable  and  right. 

The  idea  should  be  to  see  that  the  first  dollars  ac- 
tually laid  out  are  spent  for  something  of  value  in 
your  prospective  business.  Do  not  lose  sight  of  this 
fact  for  one  moment.  Instead  of,  or  in  addition  to, 
the  landlord,  you  may  enlist  a  drummer  or  traveling 
salesman  to  see  your  prospective  investor  and  talk 
about  a  certain  stock  of  machinery  or  goods  you  may 
want  to  use.  The  drummer  will  assume  the  entire 
brunt  of  the  sales  talk.  He  is  trying  to  sell  your 
prospect  something  he  can  see  with  his  own  eyes  and 
feel  with  his  own  hands,  something  tangible,  real, 
and  material.  He  argues  in  a  thoroughly  businesslike 


146  Sale  of  Inventions 

way.  He  is  like  the  landlord  who  does  not  know  how 
long  it  will  be  before  he  can  find  a  tenant,  and  so  he 
tries  with  all  his  might  to  get  a  new  tenant.  They 
know  their  business,  the  landlord  and  the  drummer, 
while  capital-raising  is  new  to  you. 

As  soon  as  you  are  ready,  fix  the  interest  which  you 
desire  in  the  new  undertaking.  Capital-raising  is  only 
a  high  form  of  salesmanship.  Advertising  is  to-day 
the  one  supreme  means  of  communication  between 
strangers.  The  average  man  thinks  more  of  his 
newspaper  than  he  does  of  any  one  of  his  friends. 
The  investor  has  the  same  regard  for  the  newspaper 
which  he  reads.  Do  not  ask  an  investor  who  is  a 
mere  stranger  to  you,  to  put  money  in  the  bank  for 
you  to  use.  Simply  get  him  to  assume  an  obligation. 
This  is  the  new  idea  which  should  dominate  your 
work.  Obligation  is  so  strongly  recognized  as  a  prime 
factor  of  business  to-day  that  it  has  become  quite  a 
struggle  on  the  part  of  the  business  man  to  place  his 
new  and  old  customers  under  obligations  to  trade. 

If  the  invention  seems  to  be  good  and  is  considered 
worth  an  investigation,  a  purchaser  will  ordinarily 
require  an  option  for,  say,  sixty  or  ninety  days.  This 
usually  will  give  sufficient  time  to  make  at  least  a 
validity  and  infringement  search.  The  underlying 
reason  for  avoiding  royalty  contracts  is  that  there  is 
always  sure  to  be  a  controversy  as  to  the  construction 
of  the  patent  and  therefore  the  scope  of  the  agreement 
to  pay  the  royalty. 

Do  not  be  anxious  to  rush  into  corporations  without 
a  sound  understanding  of  what  it  involves.  Business 
men  may  not  care  to  buy  stock  in  a  corporation  where 
they  are  offered  common  stock  only.  It  does  not 


Closing  with  Investors  147 

appeal  to  them.  They  prefer  six  per  cent  cumulative 
stock  payable  in  case  of  liquidation  of  the  company 
out  of  its  assets  before  anything  is  received  by  the 
common  stock.  If  the  owners  of  the  enterprise  feel 
sure  of  the  merits  and  the  success  of  their  invention, 
they  can  hardly  object  to  this.  The  next  point  is 
whether  the  preferred  stock  should  participate  in  divi- 
dends beyond  s'x  per  cent  and  whether  it  should  have 
the  right  to  vote.  The  investors  would  probably 
insist  upon  both  of  these  points.  Whether  or  not  they 
should  be  allowed  these  rights  is  purely  a  matter  of 
business  policy. 


CHAPTER  XVII 

RAISING  FUNDS  — THE   RIGHT   WAY 

VS.   THE   WRONG  WAY  — WHAT 

PLANS  TO  ADOPT 

WE  have  been  informed  upon  the  factors  which 
govern  the  creation  of  a  successful  inven- 
tion. The  creation  of  a  market  for  this 
patented  invention,  the  attitude  toward  the  prospective 
investor,  what  to  do  to  win  his  cooperation,  what 
plans  to  adopt  to  start  a  business  manufacturing  the 
invention,  and  what  interests  may  be  given  to  the 
investors  in  the  patent  itself  have  all  been  discussed 
generally.  So  far  the  primary  object  has  been  to  give 
the  reader  the  proper  perspective  concerning  investors 
and  their  expectations,  so  as  to  set  his  mind  at  ease. 

It  is  now  proposed  to  treat  of  details  concerning 
capital-raising,  the  methods  of  enlisting  capital,  the 
conditions  to  be  surveyed,  and  the  schemes  and  plans 
adapted  for  the  purpose  of  holding  capitalists  and 
financial  backers  in  the  foreground  of  a  meritorious 
invention.  It  is  suggested  that  the  reader  give  the 
present  chapter  his  most  earnest  perusal. 

Every  inventor  wants  to  raise  capital  to  push  his 
invention.  There  is  plenty  of  money  to  be  had  if 
he  goes  about  the  task  in  the  right  way.  There  is 
no  reason  why  he  should  not  have  a  finger  in  the  pie. 
The  things  you  believe  helpful  may  not  really  be  so, 
therefore  certain  channels  of  capital-raising  will  be 

148 


Raising  Funds  —  What  Plans  to  Adopt     149 

suggested  which  you  never  realized  before.  The  fol- 
lowing matter  comes  from  a  prospectus:  "  In  the 
state  of  New  York  alone  the  savings  banks  have  on 
deposit  over  one  billion  dollars.  This  vast  amount 
of  money  is  earning  only  from  three  to  four  per  cent. 
Within  a  radius  of  one  hundred  miles  of  that  city  there 
are  thousands  of  clerks,  mechanics,  and  professional 
men  and  women  earning  large  salaries  and  having 
no  business  of  their  own  in  which  to  invest  their  sur- 
plus funds.  All  these  must  seek  channels  for  invest- 
ment. Every  state  of  the  union  is  prosperous.  There 
is  plenty  of  idle  money  waiting  for  all  classes  of  invest- 
ments." 

Usually  the  inexperienced  inventor,  unaware  of  the 
best  plans  to  raise'  capital  suitable  to  his  own  tastes 
and  abilities  and  mistrusting  his  own  powers,  lies  in 
wait  for  some  benign  promoter  to  come  to  his  assist- 
ance and  lighten  financial  difficulties.  You  can  posi- 
tively do  as  much  of  the  work  of  raising  capital  as  any 
promoter  can,  and  in  nine  cases  out  of  ten  you  can 
do  it  better.  It  will  be  shown  how  you  can  take  a 
man  along  with  you  to  do  the  talking  for  you,  should 
you  yourself  not  be  a  good  talker.  This  man  may 
aid  you  considerably,  but  trust  yourself  chiefly.  Pre- 
pare yourself  thoroughly;  look  well  to  your  own 
personal  appearance;  be  as  natural  and  as  business- 
like as  possible,  and  all  will  be  well  with  you.  You 
need  not  tempt  Providence. 

It  is  said  that  there  are  about  seven  million  stock- 
holders in  mining,  oil,  and  the  smaller  industrial  com- 
panies located  throughout  the  eastern  states.  A 
cheap  way  of  reaching  them  is  to  get  circularizing 
lists  known  to  be  composed  of  the  names  of  such 


150  Sale  of  Inventions 

investors.  "  From  the  producer  to  the  consumer " 
is  always  a  drawing  card.  Spend  your  own  money; 
you  do  not  always  need  to  employ  that  of  other  people. 
Do  your  own  mailing,  and  you  will  see  that  the  stamps 
and  literature  you  pay  for  are  used.  Surely  you  can 
interest  as  much  capital  as  the  so-called  brokers,  and 
can  bring  as  much  grist  to  the  mill. 

More  important  than  how  to  raise  money  is  who 
is  to  raise  and  get  the  funds  needed.  Whoever  it  is, 
whether  another  person  or  yourself,  that  raises  money 
to  start  the  working  of  your  invention,  he  is  a  pro- 
moter. What  are  the  essentials  of  a  good  promoter? 
It  depends  upon  whether  or  not  a  professional  pro- 
moter is  meant.  To  be  successful  as  a  professional 
promoter,  a  man  must  have  property,  good  business 
standing,  and  reputation.  A  commercial  agency  is 
the  best  means  of  finding  out  whether  a  promoter 
possesses  all  of  these  requisites.  If  their  advice  is 
not  conclusive,  find  out  from  friends.  He  need  not 
be  a  Napoleon  of  finance. 

If  you  find  a  responsible  promoter,  you  will  have 
to  make  him  an  interesting  proposition.  He  will 
want  an  interest  in  the  enterprise,  taking  his  allotment 
out  of  stock.  The  contract  with  the  promoter  should 
be  clear  on  all  mportant  points  and  be  formally 
drawn.  He  cannot  guarantee  to  get  the  funds,  but 
he  will  try  to  get  them.  The  agreement  with  him 
should  specify  that  his  payment  is  to  be  earned  and 
to  become  a  claim  upon  the  enterprise  only  if  he  is 
successful.  If  exclusive  control  of  the  undertaking 
is  given  to  the  promoter  at  the  start  the  contract  should 
specify  when  this  control  terminates.  If  the  right  kind 
of  contract  is  executed  with  the  promoter,  the  duties 


Raising  Funds  —  What  Plans  to  Adopt     151 

of  the  inventor  will  be  light,  and  the  whole  task  of 
raising  money  will  be  on  the  promoter's  shoulders. 
The  inventor  places  everything,  documents,  state- 
ments, reports,  samples,  etc.,  in  the  hands  of  the 
promoter.  He  does  the  rest  and  lays  out  his  own 
campaign.  If  necessary  he  will  beat  up  for  recruits. 

A  successful  patent  promoter  must  have  technical  as 
well  as  legal  knowledge.  He  should  be  familiar  with 
every  phase  of  patent  law  in  order  to  get  the  best 
results.  The  idea  is  to  save  the  inventor  considerable 
embarrassment.  Avoid  misrepresentations  of  pro- 
moters. You  must  have  a  rather  big  enterprise  to 
warrant  employing  a  professional  promoter.  As  a 
rule,  such  a  man  is  needed  for  the  publicity  end  of  a 
good-sized  undertaking  only.  The  inventor  himself, 
his  friends,  or  business  acquaintances  are  best  adapted 
for  handling  the  project  privately,  that  is,  among 
acquaintances  or  within  a  small  group.  It  is  neces- 
sary to  think  twice  about  this.  Again,  starting  a 
partnership  usually  calls  for  private  promoting,  while 
starting  a  corporation  usually  calls  for  public  pro- 
moting. It  is  necessary  to  know  when  a  partnership 
is  better  than  a  corporation  and  vice  versa. 

It  is  necessary  to  dispel  the  idea  of  employing  the 
mail  order  promoter,  who,  whether  he  is  wanted  or 
not,  generally  manages  to  get  the  ear  of  the  inventor 
first.  There  are  some  men  who  make  good  incidental 
promoters.  The  financial  columns  of  a  newspaper 
will  attract  men  when  "  Business  Opportunities " 
will  not.  Some  brokers  will  finance  unusually  good 
enterprises,  bankers  seldom.  Doctors  sometimes 
make  good  promoters,  particularly  for  enterprises 
which  come  within  their  province.  Many  lawyers  are 

7 


152  Sale  of  Inventions 

instructed  by  their  clients  to  watch  for  suitable  enter- 
prises. This  is  especially  true  of  patent  lawyers. 
Most  good  inventions  pass,  in  some  way  or  other, 
through  the  hands  of  patent  attorneys.  Do  not  deal 
with  firms  offering  to  sell  inventions  who  require 
fees.  In  any  event,  don't  let  them  tie  up  your  patent. 
You  should  have  a  heart  of  oak  in  turning  these 
"  sharks  "  down. 

It  is  well  to  tell  the  inventor  about  the  various  pet 
schemes  of  these  "  sharks  "  by  which  they  swindle  the 
unwary  inventor  or  patentee.  The  advertisement  of 
concerns  of  the  public  promoter  type  usually  read 
about  the  same:  "  Capital  secured  for  meritorious 
enterprises,"  "  Companies  incorporated,  stocks  and 
bonds  sold,  and  enterprises  financed,"  "  Inventors 
and  others  desiring  additional  capital  should  see  us," 
"  We  represent  several  private  bankers,  trust  com- 
panies, and  individual  capitalists,"  etc.  They  all 
harp  on  the  same  string. 

Concerns  of  this  type  will  advise  you  to  incorpor- 
ate even  if  your  invention  has  not  been  fully  worked 
out  and  whether  or  not  they  know  anything  about 
it.  Several  such  firms  in  New  York  City  have  received 
advertising  not  desired  by  their  publicity  depart- 
ments, through  police  raids  and  proceedings  in  a 
criminal  court.  These  have  had  a  salutary  effect. 
Most  of  these  capital-raising  companies  get  enough 
money  from  their  clients  to  keep  them  going.  They 
may  make  an  attempt  at  advertising  and  soliciting 
money  personally,  but  they  are  usually  unskilled  in 
handling  inventions,  even  though  they  do  understand 
various  lines  of  business.  Avoid  these  companies 
as  you  would  avoid  a  hot  iron.  In  New  York  City 


Raising  Funds  —  What  Plans  to  Adopt    153 

and  other  large  cities  the  following  is  a  safe  rule  to 
follow:  No  matter  what  the  pretext  or  how  alluring 
the  literature  received,  refuse  flatly  any  advance  pay- 
ment demanded  by  a  promoting  concern.  Reputable 
houses  do  not  make  demands  of  this  kind.  The 
Patent  Office  issues  weekly  the  Official  Gazette  con- 
taining lists  and  addresses  of  the  patentees  to  whom 
patents  have  issued  the  current  week.  These  lists, 
primarily  intended  to  be  used  as  a  source  of  benefit 
for  inventors  and  business  men,  have  been  perverted 
by  the  "  patent  sharks,"  who  circularize  the  patentees 
with  then:  fraudulent  so-called  money-making  schemes. 
Their  pratings  are  enough  to  cause  any  man  to  make 
a  wry  face. 

If  for  any  reason  you  have  to  employ  a  professional 
promoter,  secure  the  services  of  a  lawyer  to  guide  you 
in  such  affairs.  See  him  before  closing  any  agree- 
ment with  the  promoter  or  with  the  investors.  If 
he  is  representing  your  own  interests,  he  can  guide 
you  safely  and  intelligently  where  others  fail.  Retain 
him  while  negotiations  are  being  carried  out.  Do 
not  entrust  the  well-being  of  your  undertaking  to 
the  lawyer  of  the  other  side.  Lay  the  whole  plan 
before  your  attorney. 

Knowing  when  your  enterprise  reaches  the  magni- 
tude that  calls  for  the  assistance  of  an  efficient  pro- 
fessional promoter  is  knowing  just  what  your  chances 
are  of  realizing  the  benefits  from  your  invention  at 
present  or  in  the  distant  future.  And  in  order  to 
know  whether  you  need  the  professional  promoter, 
consider  for  a  moment  what  a  contract  with  a  com- 
petent promoter  calls  for,  especially  in  such  large 
cities  as  New  York. 


154  Sale  of  Inventions 

Francis  Cooper,  in  a  most  valuable  work  entitled 
"  Financing  an  Enterprise/'  published  by  the  Roland 
Press,  New  York  City,  states  what  terms  should  be 
set  forth  in  any  agreement  entered  into  between  a 
party  seeking  investors  and  a  promoter  undertaking 
to  find  them.  They  are  as  follows: 

1.  The  agreement  should  designate  specifically  the 

enterprise  covered  by  its  terms. 

2.  The  agreement  should  be  confined  to  the  im- 

mediate issues,  to  the  one  enterprise  on  hand. 

3.  The  agreement  should  be  clearly  defined  in  its 

scope. 

4.  The  agreement  should  be  limited  as  to  time. 

5.  It  should  make  provision  for  any  partial  ful- 

fillment of  its  terms. 

6.  It  should  provide  for  any  modification  or  read- 

justment of  the  original  plan. 

7.  It  should  state  with  precision  the  commissions 

that  are  to  be  paid. 

8.  It  should  state  whether  the  commissions  are 

payable  on  the  net  amount  secured  or  on  the 
gross  amount. 

9.  It  should  state  when  and  how  commissions  are 

payable. 
10.  If  the  promoter  is  to  advance  the  money  to  pay 

the  expenses,  that  should  be  specified  in  the 

contract. 

You  should  prefer  a  private  presentation  of  your 
proposition  if  the  undertaking  is  not  large.  This  is 
simpler,  less  expensive,  and  usually  more  within  the 
inventor's  own  ability.  When  but  few  men  are  to 
be  dealt  with,  the  formalities  are  simple;  the  whole 
thing  is  manageable.  The  public  presentation  usually 


Raising  Funds  —  What  Plans  to  Adopt     155 

contemplates  a  large  number  of  small  contributors. 
A  private  presentation  enables  you  to  get  a  partner 
and  avoid  the  expenses  of  the  long-drawn-out  method 
of  organizing  a  corporation.  In  doing  so  you  play 
your  best  card. 

A  corporation  is  good  only  where  an  immense 
amount  of  capital  is  involved;  also  it  is  not  bad  where 
the  interests  are  diversified  to  a  great  extent.  But 
for  the  person  who  has  a  start  to  make  in  the  world, 
the  corporation  is  useless.  It  is  so  much  easier  to 
obtain  a  partner,  so  much  quicker  and  less  expensive. 
Selling  stock  certificates  is  ordinarily  a  very  hard 
proposition,  especially  where  there  are  no  assets  to 
show  but  the  good-will  of  the  promoter.  It  is  good 
where  you  need  more  than  $10,000  in  cash  or  have 
assets  or  an  established  business  upon  which  to  base 
your  claims.  It  is  good  where  a  business  has  already 
been  started. 

Where  you  need  a  little  money  at  the  start,  a  part- 
nership is  the  only  sure  and  sensible  course.  It  is 
easier  to  get  along  with  one  partner  than  with  many 
stockholders.  The  best  feature  of  a  partnership  is 
that  your  partner  cannot  force  you  out  merely  by  his 
own  sweet  will.  In  a  partnership  it  is  customary  that 
one  puts  in  the  money,  the  other  furnishes  the  brains 
and  does  the  work,  and  that  both  share  alike  in  the 
profits.  It  is  not  necessary  to  squabble  about  these. 

If  your  scheme  or  device  is  original  and  you  have 
a  good  plan,  employ  business  brains  to  Work  for  you, 
directly  or  indirectly.  Carlson  had  $500  and  an 
idea  for  a  kitchen  cabinet.  Seven  years  later  he  had 
a  $50,000  furniture  factory.  Gates  was  a  clothing 
salesman.  He  had  less  than  $1000.  He  invented 


156  Sale  of  Inventions 

a  scheme  of  selling  clothing  at  a  $i  down.  Within  ten 
years,  the  extension  of  credit  to  the  small  salaried 
persons  made  him  a  large  fortune.  These  men  had 
ideas,  clever  schemes  coupled  with  financeering  genius. 
Why  not  at  least  imitate  them? 

It  is  only  when  you  have  an  established  business 
that  the  banks  will  help  you.  The  question,  "  When 
does  the  bank  say  '  no  '?  "  was  put  to  the  president 
of  a  large  bank  in  Chicago.  "Never,  when  the  bank 
can  help  it,"  he  replied.  You  generally  consult  the 
bank  when  you  need  more  capital  in  your  business. 
Why  not  do  it  when  starting  the  business,  which  is 
the  first  consideration?  It  also  means  proceeding 
along  the  line  of  least  resistance,  the  easiest  way. 
There  are  exceptions  to  every  rule.  If  you  understand 
the  mainsprings  of  human  conduct,  you  can  start  big 
as  well  as  small  enterprises  in  an  unusually  short  time. 

Sometimes  in  promoting  an  enterprise,  local  per- 
sonal pride  enters  as  an  important  factor.  It  is  well 
known  that  many  small  towns  are  seeking  to  have 
factories  established  there.  If  you  can  show  the  im- 
portance of  establishing  a  factory  to  manufacture 
your  invention  in  any  such  locality,  you  may  easily 
raise  the  money  from  local  residents. 

If  the  enterprise  appeals  to,  and  will  benefit,  any 
particular  industry  or  line  of  business,  that  fact  may 
be  used  to  advantage.  A  banker  may  subscribe  to 
an  enterprise  which  promises  deposits  to  his  bank. 
If  a  new  grain  elevator  is  to  be  established,  the  farmers 
of  the  neighborhood,  who  will  be  benefited  by  its 
erection,  may  be  interested.  Sometimes,  offering  some 
special  person  a  position  in  a  new  enterprise  will  be 
influential  in  securing  capital.  He  must,  however, 


Raising  Funds  —  What  Plans  to  Adopt     157 

be  competent  to  perform  the  expected  service.  If  the 
young  man  cannot  subscribe  himself,  he  will  convert 
himself  into  a  very  active  and  interested  agent  of  the 
enterprise  and  help  you  to  find  investors.  You  may 
cause  some  influential  man  to  become  interested  by 
offering  him  the  treasurership.  Such  men  give  solidity 
to  the  undertaking,  create  confidence  in  its  future, 
and  are  a  material  aid  in  securing  subscriptions.  Some 
men  act  because  their  friends  act,  having  themselves 
no  intention  of  subscribing  to  stock.  They  follow  the 
crowd.  Some  one  is  needed  to  make  the  start,  how- 
ever. If  the  "  initial  break  "  is  effected,  the  rest  is 
comparatively  easy.  They  come  in  while  there  is  a 
"  high  tide." 

At  the  very  beginning  in  looking  for  investors,  it 
is  necessary  to  obtain  names  and  introductions.  These 
investors  may  come  from  among  your  relatives,  friends, 
and  acquaintances  or  from  among  the  general  public. 
Do  not  waste  time  with  relatives,  friends,  and  ac- 
quaintances as  a  rule.  We  will  tell  you  the  reason. 
If  you  can  approach  them  in  the  same  way  you  can 
strangers,  then  by  all  means  do  so. 

Be  sure  that  the  proposition  presented  to  friends 
is  a  sound  one.  Friends  will  go  into  the  enterprise 
largely  because  of  their  confidence  in  the  promoter. 
They  do  not  scrutinize  his  offering  so  closely  as  that 
of  a  stranger,  and  they  naturally  demand  special  con- 
sideration and  better  protection.  If  the  enterprise  is 
not  successful,  they  think  that  their  confidence  has 
been  abused.  An  unsuccessful  enterprise  is  likely  to 
make  trouble  for  its  promoter  whether  floated  among 
friends  or  strangers.  They  do  not  care  to  listen  to 
explanations  afterward. 


158  Sale  of  Inventions 

Therefore  financing  among  friends,  if  conditions  are 
right,  is  easy.  The  enterprise  must  be  suitable,  the 
proposition  fair,  the  friends  must  have  money  to 
invest,  and  the  promoter  must  possess  their  confidence. 
To  get  them  interested,  a  pencil  and  a  few  scraps  of 
paper  take  the  place  of  a  prospectus.  If  an  enter- 
prise is  looked  upon  with  doubt,  the  promoter's  in- 
genuity will  be  taxed  to  remove  the  unfavorable  im- 
pression. He  must  then  be  prepared  to  demonstrate 
the  safety,  suitability,  and  the  profitable  nature  of 
the  enterprise.  If  he  cannot  do  this,  he  should  not 
present  the  matter  to  his  friends  at  all. 

The  soliciting  method  is  the  cheapest,  but  it  is  to 
be  tried  only  where  you  cannot  spare  the  money  for 
an  advertisement.  It  simply  requires  time  and  shoe 
leather.  You  call  on  any  man  in  his  office  and  explain 
your  proposition.  It  calls  for  a  little  nerve  and  courage. 
After  you  have  seen  a  few  men,  the  awkwardness  will 
leave  you  and  you  will  be  surprised  at  your  own  ability. 

Circularizing  requires  that  you  send  a  circular  to 
a  few  hundred  or  thousand  business  men  in  your 
vicinity.  You  should  get  replies  in  proportion  to 
the  attractiveness  of  your  proposition.  This  plan 
is  good  in  small  towns  where  the  advertising  facilities 
are  not  of  the  best.  If  the  circular  is  well  written, 
the  replies  will  be  of  such  a  nature  that  you  will  have 
a  good  chance  to  get  a  partner.  It  is  slower  than 
advertising  in  the  papers.  Its  advantage  is  that, 
the  postage  being  the  main  cost,  one  may  prepare  a 
list  of  names  and  mail  a  few  letters  from  time  to  time. 
Its  disadvantage  is  slowness. 

It  is  possible  that  such  correspondence  alone  will 
suffice.  If  the  device  invented  interests  the  persons 


Raising  Funds  —  What  Plans  to  Adopt     159 

addressed,  they  will  surely  not  let  slip  the  opportunity 
to  get  in  touch  with  the  inventor.  If  they  are  not 
interested,  it  is  best  for  an  inventor  to  know  this  early 
in  the  game.  He  will  thereby  avoid  spending  con- 
siderable money.  The  inventor  of  an  improved  shoe 
lace  wrote  and  sent  samples  of  his  product  to  several 
large  shoe  manufacturers.  It  is  admitted  the  results 
were  disappointing;  but  if  the  shoe  lace  had  been 
worth  adopting,  his  letter  would  certainly  have  led 
to  business.  Where  letters  are  sent  out,  they  should 
aim  to  persuade  and  convince;  they  should  contain 
the  "  punch  "  so  as  to  lead  to  action.  If  a  prospectus 
does  not  accompany  the  letter,  the  explanation  has  to 
be  more  lengthy.  As  no  personal  work  is  supposed 
to  follow  up  the  printed  matter,  the  latter  must  be 
effective  to  induce  action.  Corresponding  to '  the 
skill  with  which  the  printed  matter  has  been  prepared, 
the  returns  from  circularizing  vary  from  nothing  to  the 
most  gratifying. 

If  your  proposition  calls  for  the  organization  of  a 
corporation,  circularizing  will  help.  To  get  the  best 
results  from  this  method,  it  is  necessary,  first,  to  get 
the  most  up-to-date  list  of  names;  second,  to  send  out 
the  best  kind  of  facsimile  letter  with  the  name  and 
address  perfectly  matched  at  the  top  and  accom- 
panied by  a  well- written  and  attractive  prospectus; 
third,  about  fifteen  days  after  the  first  letter,  to  mail 
a  second  and  then  a  third  follow-up  letter  to  those 
not  answering  the  first.  Above  all,  take  pains  with 
the  first  letter.  You  should  get  the  best  returns  in 
this  way. 

You  may  try  circularizing  by  way  of  experiment, 
but  your  effort  in  experimenting  must  be  on  a  sufficient 


160  Sale  of  Inventions 

scale  really  to  prove  the  success  or  failure  of  the  plan. 
Just  what  number  of  letters  should  be  sent  out  depends 
upon  the  undertaking.  «/ 

The  letters  should  usually  be  very  short.  You  may 
employ  a  letter  and  a  prospectus.  Business  men  do 
not  throw  away  letters  coming  into  their  offices  under 
two-cent  postage  and  addressed  to  them,  without 
first  reading  the  contents,  in  whole  or  in  part.  The 
function  of  the  letter  is  to  present  the  important 
features  of  the  enterprise  with  such  strength  and  at- 
tractiveness that  the  interest  of  the  reader  will  be 
aroused.  The  best  authorities  say  that  mailing  in- 
vesters  a  printed  circular  is  not  as  good  as  sending 
an  imitation  typewritten  letter.  This,  however,  must 
be  very  well  done. 

It  does  not  necessarily  follow  that  because  your 
prospects  are  very  numerous,  circularizing  them  is  the 
best  plan.  The  nature  of  the  proposition  is  the  de- 
terminant factor.  People  of  small  means  do  not  like 
to  hoard  their  money.  The  money  should  be  working 
for  its  owners.  Everybody  knows  and  wishes  for  this. 
The  modest  three  to  five  per  cent  of  the  ordinary  con- 
servative investment  is,  as  explained  before,  not 
attractive  enough.  If  these  people  can  be  convinced 
that  an  undertaking  is  reasonably  safe  and  that  by 
investing  therein,  they  will  secure  at  least  eight  or 
even  ten  per  cent,  with  good  prospects  of  larger  re- 
turns and  perhaps  a  doubling  or  trebling  of  the  original 
investment,  they  will  be  ready  to  accept  such  a  good 
proposition.  The  objection  against  public  presenta- 
tion is  that  in  order  successfully  to  work  up  this  army 
of  small  investors,  it  is  necessary  to  do  extensive,  ex- 
pensive, continuous  able  work.  Public  presentation 


Raising  Funds  —  What  Plans  to  Adopt     161 

is  good  where  speculative  enterprises  are  started,  in 
which  the  risks  are  excessive  and  the  rewards  equally 
great  in  the  event  of  success;  but  it  may  be  safely  said 
that  this  is  not  the  way  for  the  average  inventor  to 
realize  on  his  own  invention. 

There  are  people  around  you,  among  whom  you 
move,  who  can  do  you  the  greatest  measure  of  good  in 
closing  with  your  prospect.  Take  the  newspaper 
reporter  as  an  example.  He  is  among  those  best  able 
to  assist  you  in  raising  capital  because  of  his  experi- 
ence, talent,  and  occupation.  He  can  talk  fast,  write 
fast,  reason  fast,  and  argue  fast,  and  he  can  do  all  these 
things  remarkably  well.  Pay  the  reporter  who  is  not 
too  much  taken  up  all  the  time  with  his  work  to  assist 
you,  to  urge  your  prospect  to  a  decision.  Reporters  are 
a  determined  set.  The  editor  often  sends  them  out 
to  get  a  story  at  any  cost,  so  they  are  used  to  over- 
coming obstacles.  You  should  explain  your  position 
to  the  reporter  after  selecting  a  suitable  sales  method. 
The  reporter  will  do  all  the  talking  necessary.  He  is 
usually  a  very  good  judge  of  men.  You  may  pay  hiTr> 
a  contingent  fee  if  you  succeed  in  landing  the  prospect. 
While  it  is  out  of  his  line,  he  can  adapt  himself  to 
soliciting  for  you.  The  reporter  can  also  assist  you 
in  writing  a  "  catchy  ad."  Reporters  are  a  clever, 
brainy  set.  The  landlord  is  not  the  only  one,  there- 
fore, who  can  help,  nor  is  the  drummer. 

Try  the  insurance  man.  Make  an  appointment  with 
the  inventor  and  take  the  insurance  man  along,  having 
first  acquainted  him  with  your  plan.  The  insurance 
man  is  always  right  at  hand,  easy  of  access,  always 
ready,  and  always  enthusiastic.  He  is  therefore  al- 
ways greatly  to  be  desired  as  an  able  aid  in  securing  a 


162  Sale  of  Inventions 

partner.  Let  him  interview  the  prospects  who  answer 
your  newspaper  "  ad."  He  has  gone  through  the 
hardest  trials  of  business,  and  therefore  he  can  be 
expected  to  perform  for  you  this  important  service. 

Next  comes  the  advertising  man.  An  advertising 
agency  is  often  instrumental  in  starting  you  on  the 
right  road  to  success  hi  obtaining  capital.  Besides 
getting  out  the  "  ad  "  for  you,  some  one  in  touch  with 
the  agency  may  help  you  interview  the  prospect.  In 
a  very  large  city  you  will  find  such  advertising  agencies. 

Get  in  touch  with  an  advertising  solicitor  of  one  of 
these  agencies.  Tell  him  what  you  want  to  do,  ask 
his  advice,  and  profit  by  his  experience.  As  a  class 
advertising  men  to-day  are  counted  among  the  smart- 
est of  men  this  country  produces.  An  "  ad  "  man  is 
always  looking  for  some  new  idea,  some  new  experience 
upon  which  to  build  a  business  education.  He  is 
always  hunting  the  odd  dollars.  He  is  sensible,  talka- 
tive, wise,  a  good  thinker  and  reasoner.  He  is  easy 
to  find,  easy  to  interest,  and  very  important  to  enlist 
in  business  matters.  He  can  write  a  nice  "  ad  "  for 
your  prospectus.  Offer  to  pay  him  a  set  price  for 
each  interview,  contingent  upon  his  or  your  success. 
Place  your  "  ads  "  in  the  papers,  secure  the  names  of 
investors,  and  go  after  them  according  to  any  of  the 
foregoing  plans.  You  may  use  people  in  your  vicinity 
in  any  of  the  ways  already  suggested. 

But  it  is  the  lawyer  you  should  consult  at  all  times 
and  at  every  stage  in  the  marketing  of  your  invention, 
and  especially  in  disposing  of  the  whole  or  a  partial 
interest  in  your  patent.  You  should  also  consult  a 
lawyer  at  times  in  order  to  close  with  your  prospect. 
Visit  him  and  ask  him  first  what  his  fee  will  be.  Most 


Raising  Funds  —  What  Plans  to  Adopt     163 

lawyers  will  prefer  a  contingent  fee,  which  should 
not  be  over  $50  for  each  $1000  you  are  trying  to  raise. 
That  would  be  a  fair  price,  as  you  must  do  the  pre- 
liminary work,  pay  for  the  advertising,  interview 
prospects,  etc.  If  reasonably  certain  of  the  lawyer's 
ability,  you  can  pay  him  a  stipulated  sum  down. 
After  having  placed  the  "ad,"  received  the  replies, 
and  selected  the  most  promising  prospects,  get  them 
to  go  with  you  to  the  lawyer,  or  take  the  lawyer 
with  you  to  interview  them.  The  lawyer  is  not  work- 
ing for  his  fee  only;  he  values  also  the  future  legal 
business  of  the  new  firm. 

You  need  the  assistance  of  a  lawyer  even  before  you 
apply  for  a  patent.  Thus  when  a  transfer  of  an  in- 
vention or  a  patent  is  made  and  an  inventor  agrees 
to  part  with  an  interest  before  an  invention  is  com- 
pleted, there  will  be  need  of  a  contract  for  the  future 
transfer  of  rights  to  the  invention.  This  contract 
is  not  an  assignment  but  only  an  agreement  to  assign. 
It  conveys  only  an  equitable  interest,  which  equitable 
right  may  be  enforced  in  a  court  of  equity  by  a  suit 
to  compel  specific  performance.  If  there  are  condi- 
tions to  be  fulfilled  by  the  transferee,  such  as  the  pay- 
ment of  installments  or  royalties,  the  perfecting  or 
exploiting  of  an  invention,  its  advertising  and  push- 
ing, these  conditions  should  be  clearly  and  distinctly 
stated.  Give  the  dates  on  which  the  installments  or 
royalties  shall  become  due,  the  manner  in  which  they 
shall  be  paid,  the  amount  of  advertising  to  be  done,  its 
character,  the  ways  in  which  the  invention  shall  be 
pushed,  or  the  degree  of  excellence  in  construction  to 
which  the  manufacturer  should  be  held. 

An  inventor  may  be  entering  on  a  contract  for  the 


164  Sale  of  Inventions 

operation  of  his  patent.  Perhaps  among  the  inci- 
dentals a  satisfactory  royalty  is  mentioned  but  no 
minimum  production  clause.  Such  an  omission  is, 
of  course,  fatal.  The  attorneys  on  the  other  side 
cannot  be  expected  to  call  this  fatal  omission  to  your 
attention.  There  may  be  local  laws  materially  af- 
fecting your  contract  of  which  the  lawyer  has  par- 
ticular knowledge.  When  dealing  with  strangers,  it 
is  best  to  engage  an  attorney  to  look  after  your  legal 
interests.  If  your  means  are  limited,  let  the  attorney 
know. 

Patent  lawyers  should,  if  possible,  be  consulted 
about  licenses  to  make,  use,  or  sell  an  invention. 
Never  think  of  giving  a  license  or  arranging  a  royalty 
agreement  without  seeking  the  best  legal  advice 
obtainable. 

Also  seek  commercial  advice.  The  legal  advice  is 
necessary  that  you  may  see  that  there  is  nothing  in  the 
contract  which  will  act  to  your  disadvantage.  The 
commercial  advice  is  necessary  that  you  may  see  that 
the  terms  of  the  contract  are  fair  to  the  inventor  com- 
pared with  the  advantage  derived  from  the  inven- 
tion. Licenses  are  often  most  difficult  to  arrange  to 
the  satisfaction  of  both  parties.  There  are  many 
acts  of  the  inventor  which  do  not  seem  to  be  binding 
upon  him  if  no  good  contract  exists.  But  when  it  is 
too  late  and  valid  rights  inhere  by  virtue  of  these 
acts,  the  inventor  cannot  repudiate  them.  If  an 
article  sold  is  of  such  peculiar  construction  as  to  be 
of  no  practical  value  unless  it  is  used  in  connection 
with  some  subordinate  parts,  covered  by  another 
patent  owned  by  the  inventor,  the  right  to  use  the 
latter  in  cooperation  with  the  former  might  be  implied 


Raising  Funds  —  What  Plans  to  Adopt     165 

from  circumstances.  Shop  rights  are  also  implied 
licenses.  A  machine  made  with  the  knowledge  and 
consent  of  the  inventor  before  his  application  for  a 
patent,  carries  with  it  an  implied  license  from  the 
inventor  good  for  any  purchaser. 

Expert  legal  knowledge  of  the  characteristics  of  a 
license  must  also  be  obtained  by  the  inventor.  A 
license  to  make,  use,  or  sell  in  a  limited  territory,  in  the 
absence  of  an  agreement  to  that  effect,  does  not  pass 
to  an  executor  or  an  administrator.  And  a  license 
cannot  be  taken  possession  of  by  an  assignee  or  receiver, 
unless  there  is  a  provision  for  that  in  the  license.  Nor 
can  a  licensee,  holding  a  license  which  is  terminable 
at  the  licensor's  option,  manufacture  a  great  quantity 
of  articles  ahead  of  time  and  sell  them  after  the  license 
is  relinquished.  Again,  the  man  who  puts  up  the  money 
is  shrewd  enough  to  protect  his  own  interests  and  is 
sure  to  hire  a  lawyer,  as  witness  the  protective  clauses 
usually  inserted  in  assignment  contracts,  or  more 
specifically  in  royalty  agreements:  that  royalty  may 
be  deducted  for  all  goods  returned;  that  no  payments  will 
be  made  during  any  suit  brought  against  an  assignee;  that 
the  royalty  terminates  if  the  patent  is  decided  invalid; 
that  future  inventions  will  also  be  assigned  to  the  as- 
signee. 

If  you  know  just  what  kind  of  assignments  to  make, 
you  are  thoroughly  primed  when  it  comes  to  transferring 
an  interest  in  your  patent.  An  assignment  is  of  the 
invention  itself  and  may  be  made  either  before  an 
application  is  filed,  before  the  patent  issues,  or  after- 
ward. If  made  before  the  filing  of  the  application,  the 
assignment  should  refer  to  the  date  on  which  the  ap- 
plication was  executed  and  should  be  forwarded  with 


1 66  Sale  of  Inventions 

the  application  papers.  If  made  after  filing  but  be- 
fore the  issue  of  the  patent,  the  serial  number  and 
date  of  application  should  be  given.  If  made  after 
the  patent  has  issued,  the  number  and  date  of  the 
patent  should  be  stated.  This  is  in  order  that  the 
Patent  Office  may  identify  the  particular  invention 
transferred.  This  is  as  necessary  with  patents  as 
with  land  deeds. 

An  assignee  of  a  patent  should  have  his  assignment 
recorded  in  the  United  States  Patent  Office.  Imme- 
diately upon  the  assignment  of  a  patent,  send  the 
document  to  the  Commissioner  of  Patents,  Washing- 
ton, D.  C.,  with  a  fee  of  $1.00  for  three  hundred  words 
or  under.  For  documents  over  three  hundred  words 
and  under  one  thousand  words,  the  recording  fee  is 
$2.00;  for  over  one  thousand  words,  $3.00  is  required. 
Upon  receipt  of  the  fee  the  document  will  be  recorded 
and  in  time  will  be  returned  to  the  sender. 


CHAPTER  XVIII 

ADVERTISING   FOR   CAPITAL 

LEADING   UP   TO  A    PARTNERSHIP  OR 

CORPORATION 

THE  purpose  of  this  chapter  is  to  show  that  it  is 
not  a  hard  thing  to  raise  capital  if  one  does  the 
right  thing,  if  the  right  kind  of  association  be- 
tween the  inventor  and  capitalist  exists.     Your  chances 
of  raising  capital,  if  you  go  about  it  in  the  right  manner, 
will  be  as  good  as  one  in  four,  so  eager  is  the  world  to 
welcome  ambition,  so  generous  is  the  reception  to  the 
man  who  really  tries. 

It  will  be  shown  that  forming  a  corporation  or  a 
partnership  offers  to  the  inexperienced  inventor  the 
easiest  solution  of  the  problem  of  raising  funds.  // 
you  are  not  inexperienced,  strike  out  for  yourself  and 
do  not  ask  for  any  assistance.  Make  a  noise  in 
the  world.  Choose  always  the  quicker  method.  By 
acting  for  yourself,  you  save  valuable  time  and  gain 
in  publicity.  You  must  be  very  careful  in  your  pre- 
paration when  you  intend  to  rely  on  your  own  efforts. 
It  is  necessary  for  you  to  know  the  limits  of  your 
power  and  whether  or  not  a  matter  is  within  your  pre- 
vious experience.  You  must  be  able  to  convince  others 
of  your  ability  to  handle  the  enterprise.  If  you  feel 
confident,  however,  then  fight  the  good  fight;  plunge 
right  into  it,  and  you  will  get  results.  First,  place 
the  "  ad  "  calling  for  investors  in  the  papers.  Next, 

167 


1 68  Sale  of  Inventions 

guard  against  discouragement,  for  just  at  this  point 
most  ambitious  people  fail.  Either  they  are  afraid 
to  spend  the  money  for  an  "  ad  ";  or  if  they  place  an 
"ad,"  they  insert  only  two  or  three  lines  in  one  paper 
and  call  that  a  fair  test.  They  expect  to  succeed 
without  a  flourish  of  trumpets.  Do  not  deceive  your- 
self into  thinking  that  two  lines  are  as  good  as  four, 
that  ten  are  as  good  as  twenty,  etc.  That  argument 
is  certainly  false.  More  than  anything  else  it  has 
forced  men  to  work  on  a  strict  salary  basis  instead  of 
being  their  own  bosses.  In  spending  money  to-day 
it  does  not  pay  to  be  wedded  to  an  opinion. 

Advertise  for  prospects.  It  pays  to  advertise  and 
to  draw  on  futurity.  Get  out  an  advertisement  and 
make  it  Ug  enough  to  attract.  Do  not  be  thin-skinned. 
Insert  it  at  once.  When  you  get  the  replies,  you  will 
see  that  it  is  only  a  question  of  time  until  you  will  get 
the  money.  Remember,  this  practical  method  is  not 
only  for  to-day  or  to-morrow.  Try  it  every  time. 
Nothing  is  more  important  than  selecting  the  right 
kind  of  newspapers.  Pick  out  the  best  ones.  Select 
the  progressively  conservative,  not  the  radical  paper; 
the  truthful,  not  the  false;  the  substantial,  not  the 
trashy;  the  masterful  and  sensible,  not  the  sensa- 
tional, —  the  paper  the  business  man  reads,  and  then 
you  are  sure  to  have  your  "  ad  "  read  by  the  right 
kind  of  people,  those  who  have  money.  Financial 
advertising  pays.  Over  a  million  dollars  is  paid  to 
the  newspapers  of  this  country  every  week  for  just 
such  advertisements  as  you  are  advised  to  place.  It 
is  out  of  the  question  that  the  people  who  spend  all 
that  money  in  one  week  are  deceived.  They  are  not. 
They  are  wise.  They  were  convinced  by  the  logic 


Advertising  for  Capital  169 

of  events,  reason,  observation,  and  experience.  They 
do  not  spend  by  halves. 

Use  what  is  called  a  blind  advertisement.  It  is  a 
very  good  plan.  A  blind  advertisement  is  one  that 
states  as  much  of  your  proposed  plan  as  may  be  de- 
sirable and  which  contains  either  a  newspaper  number, 
a  post-office  box,  an  address  in  care  of  some  one  else, 
or  any  other  scheme  for  securing  inquiries  without 
letting  your  own  identity  be  known  publicly.  Use 
this  blind  "  ad,"  because  it  is  private  and  shows  the 
relative  values  of  various  advertising  mediums.  It 
may  pull  as  many  results  as  any  other  "  ad."  Have 
it  inserted  in  one  or  more  of  the  leading  daily  or  Sun- 
day papers  in  your  vicinity;  you  may  even  try  the 
leading  national  weeklies.  The  following  are  chiefly 
held  for  this  purpose:  New  York  Herald,  New  York 
World,  Minneapolis  Tribune,  New  Orleans  Times, 
Milwaukee  Sentinel,  Detroit  News,  San  Antonio  Light, 
Washington  Times,  Los  Angeles  Times,  Cleveland 
Plain  Dealer,  Pittsburg  Despatch,  Cincinnati  In- 
quirer, Denver  Post,  Boston  Globe,  Indianapolis  Star, 
Portland  Oregonian,  Baltimore  American,  Des  Moines 
Register,  Kansas  City  Star,  Omaha  World  Herald, 
Dallas  News,  San  Francisco  Call,  St.  Louis  Globe 
Democrat,  Seattle  Post  Intelligencer,  Chicago  Record 
Herald,  etc. 

After  a  few  trials  you  will  find  out  what  the  replies 
cost.  You  should  get  five  replies  for  every  $1000 
you  want  to  raise;  i.e.,  out  of  five,  you  are  reasonably 
certain  to  get  a  partner  with  $1000,  out  of  ten  replies, 
a  partner  with  $2000,  and  out  of  twenty  replies,  a 
partner  with  $4000.  In  any  campaign  you  will  find  that 
a  reply  from  a  $500  man  will  cost  less  than  a  reply 


170  Sale  of  Inventions 

from  a  $1000  man  because  there  are  more  people  in 
the  $500  class  than  in  the  $1000  class;  again,  many 
in  the  $1000  class  would  risk  part  but  not  all. 

If  you  can  start  with  a  small  amount,  then  word  your 
"  ad,"  "  A  few  hundred  wanted  "  or  "  A  few  thousand 
wanted."  The  cost  of  replies  should  not  be  more  than 
$5  where  any  amount  less  than  $10,000  is  wanted.  In 
reality  it  will  be  found  to  be  nearer  $i  than  $5.  As 
a  general  rule,  replies  will  not  cost  more  than  $5  each; 
some  have  not  cost  more  than  25^  each.  The  average 
cost  is  about  50^  for  each  $1000  or  less.  Thus  a  reply 
from  a  $3000  man  would  cost  $1.50;  from  a  $5000 
man,  $2.50,  etc.  These  figures  are  given  in  a  general 
way  as  approximately  correct.  The  circulation  of 
newspapers  varies  from  day  to  day.  No  one  can 
tell  what  one  "  ad  "  will  do  on  any  given  day;  how- 
ever, after  finding  out  the  cost  of  a  few  replies,  you 
may  be  able  to  reach  a  basis  for  determining  the  rest. 

If  you  have  placed  an  "  ad  "  for  partners  and  failed 
to  get  them,  it  may  have  been  either  too  small  to  attract 
attention  or  too  poorly  written.  We  are  referring  now 
to  getting  replies,  not  to  landing  your  prospect.  That 
depends  upon  the  nature  of  your  proposition. 

Investors  are  not  interested  in  flowery  language  em- 
ployed in  prospectuses.  You  cannot  beat  it  into  their 
heads  by  mere  words.  They  want  facts.  If  you  have 
failed,  do  not  let  that  discourage  you,  and  do  not  be 
thrown  off  your  balance.  Put  out  a  bigger  "  ad  " 
next  time  and  try  a  different  paper.  An  advertise- 
ment costing  ten  dollars  is  practically  certain  of  bring- 
ing replies.  As  far  as  publication  is  concerned,  if  it  is 
a  choice  between  daily  or  Sunday  newspapers,  you 
should  pick  out  the  one  having  the  most  financial 


Advertising  for  Capital  171 

advertising  or  the  one  having  the  most  classified  busi- 
ness chances  or  opportunities. 

After  you  have  obtained  a  sufficient  number  of  replies 
from  the  newspapers,  what  is  the  next  thing  to  do? 
It  is  to  select  those  among  your  prospects  who  will 
make  the  best  partners  or  stockholders,  so  that  you 
may  be  able  to  start  the  enterprise  as  soon  as  possible. 
A  corporation  should  be  organized  for  a  growing  business 
in  need  of  more  capital,  while  a  partnership  should 
be  resorted  to  for  the  purpose  of  starting  a  business. 
A  partnership  is  best  even  if  you  must  come  down  a 
peg  in  your  plans. 

It  is  necessary  to  know  why  you  should  advertise 
for  partners.  Finding  a  partner  is  the  best  plan. 
The  money  secured  through  partnership  belongs  en- 
tirely to  your  enterprise.  There  is  no  interest  to  pay 
on  it,  and  you  are  in  no  danger,  when  loans  are  sought, 
of  being  forced  to  go  out  of  business  to  pay  back  the 
money.  There  is  an  old  saying,  "  Choosing  a  part- 
ner is  like  choosing  a  wife."  Many  an  investor  says  he 
is  willing  to  join  in  your  enterprise,  but  does  not  want 
to  invest  until  all  the  stock  is  sold.  When  only  one 
feels  that  way,  it  does  not  matter  much,  but  when  they 
all  feel  that  way  you  are  up  against  a  snag.  The 
very  hardest  part  of  selling  stock  when  organizing  a 
corporation  is  the  getting  of  the  first  thousand  dollars. 
That  much  real  money  in  sight  gives  more  confidence 
than  can  be  secured  in  any  other  way.  It  is  harder  to 
convince  twenty  men  than  five.  It  is  just  as  hard  to 
sell  one  as  another.  Do  not  overmeasure  your  op- 
portunities. 

You  must  be  sure  that  your  partner  will  prove  an 
asset  to  your  undertaking.  He  should  be  of  the  right 


172  Sale  of  Inventions 

sort,  willing  to  cooperate  when  needed  and  to  do 
nothing  when  not  needed.  Before  admitting  a  partner 
you  should  know: 

1.  About  his  ability,  his  past  record,  his  standing 

in  the  community,  his  technical  knowledge, 
his  education,  his  personal  habits,  and  his 
financial  expertness. 

2.  Whether  his  knowledge,  experience,  and  ability 

complete  yours,  and  whether  you  could  work 
with  him  to  advantage. 

3.  Whether  he  has  a  disposition  that  inclines  him 

to  restlessness. 

4.  Whether  he  is  ambitious;  whether  he  will  put  his 

best  efforts  into  building  up  your  concern. 

5.  Whether  he  is  honest;    whether  his   character 

warrants  complete  trust. 

Do  not  believe  that  the  party  you  deal  with  is  of 
no  importance  and  that  the  main  thing  is  to  get  the 
money.  Do  not  simply  lay  his  funds  under  contri- 
bution. Never  join  with  one  whose  dealings  you 
cannot  approve,  whether  as  a  matter  of  business 
honesty  or  business  prudence.  If  you  do,  you  are 
sure  to  regret  it.  Your  business  associates  should 
be  of  the  same  disposition  as  yourself.  If  they  have 
foresight  and  executive  ability,  they  have  the  qualities 
especially  needed.  Where  it  is  a  question  of  preventing 
a  miscarriage  of  the  entire  venture,  it  is  to  your  in- 
terest to  select  some  one  in  whom  you  can  confide. 

In  a  partnership  contract,  see  that  the  following 
stipulations  are  included  by  your  attorney: 

i.  Provide  for  joint  appraisal  or  an  arbitration  com- 
mittee to  settle  differences  between  your  esti- 
mates of  the  values  of  the  business. 


Advertising  for  Capital  173 

2.  If  one  partner  presents  a  proposal  for  the  dis- 

solution of  the  partnership,  the  other  should 
have  the  right  either  to  buy  or  to  sell. 

3.  Even    responsibility   in    the    addition    of    new 

capital. 

4.  A  clear  division  of  duties. 

5.  The  amount  of  profits  to  be  taken  out  of  and  the 

amount  to  be  put  back  into  the  business. 

6.  A  fair  interest  on  all  investments. 

7.  A  salary  basis,  in  case  profits  are  not  divided 

evenly. 

Always  choose  the  practical  man  to  shape  the 
destiny  of  your  affairs.  Any  man  can  distinguish 
between  a  business  success  and  a  business  failure,  be- 
tween an  experienced  and  an  inexperienced  person, 
between  the  novice  and  the  dunderpate,  between  a 
practical  man  and  a  doctrinaire.  In  every  case  prefer 
the  practical  man. 

Unless  your  partner  is  the  right  kind,  he  may  merely 
prove  a  dead  weight.  Remember  that  taking  in 
capital  means  sharing  the  profits  and  sharing  the 
risks.  Again  we  say,  be  careful  of  your  associates 
as  partners.  An  inventor  once  advertised  for  capital 
to  float  an  enterprise.  He  received  five  answers, 
four  from  chattel  mortgage  sharks  and  one  from  a 
man  who  had  a  little  money  and  desired  employment 
for  himself  as  well  as  for  it.  The  inventor  accepted 
the  last  offer.  His  partner  appeared  at  first  to  have 
some  ability.  The  inventor's  good  opinion  of  him 
did  not  last,  however.  Every  night  when  the  in- 
ventor came  in  tired  but  loaded  with  orders,  his  part- 
ner would  be  waiting  for  him  with  a  typewritten  list 
of  matters  upon  which  he  wanted  to  consult.  The 


174  Sale  of  Inventions 

inventor  would  skim  through  the  list  and  tell  him 
what  to  do.  What  he  was  told,  he  would  always  write 
down  for  fear  of  forgetting.  He  had  waited  for  orders 
until  he  could  not  overcome  the  habit.  In  a  few 
months,  capital  ran  short.  The  partnership  was 
dissolved,  although  the  interest  in  the  patent  was  still 
divided.  Later  the  inventor  sold  the  patent  for 
$10,000  and  was  obliged  to  give  $5000  of  it  to  his 
former  incapable  partner.  It  is  not  like  hiring  an 
employee  whom  you  can  always  fire,  but  a  case  of 
always  having  to  divide  the  profits  when  you  dis- 
solve. There  is  no  saving  clause  to  overcome  this 
as  long  as  it  is  a  partnership  arrangement. 

How  about  a  corporation?  A  corporation  is  an 
artificial  creature  in  law,  consisting  of  one  or  more 
persons  united  in  one  body  under  certain  grants  to 
secure  a  succession  of  members  without  changing  the 
identity  of  the  body.  It  is  empowered  to  act  in  a 
specified  capacity  or  to  transact  some  designated 
business  the  same  as  an  individual.  A  closed  cor- 
poration is  one  in  which  vacancies  are  filled  by  the 
corporation  itself.  A  sole  corporation  consists  of  a 
single  person  at  any  one  time  invested  with  certain 
legal  capacities  and  powers  not  otherwise  possessed. 
A  joint  stock  corporation  is  one  in  which  the  ownership 
of  stock  is  divided  into  shares.  A  close  corporation 
is  an  incorporated  company  the  stock  of  which  is  held 
by  a  limited  number  of  persons  and  is  not  in  the  hands 
of  the  public.  Usually  in  a  close  corporation  there 
is  an  agreement  or  understanding  among  a  few  stock- 
holders, whereby  each  is  prohibited  from  disposing 
of  or  selling  his  interest  without  consent  of  the  others. 

Capitalization  is  the  bone  and  marrow  of  a  corpora- 


Advertising  for  Capital  175 

tion.  To  the  inventor  about  to  start  a  corporation, 
the  question  of  capitalization  is  doubly  import- 
ant because  it  measures  his  own  interest  in  the  com- 
pany. In  this  aspect  capitalization  has  two  entirely 
distinct  and  very  important  functions:  (i)  as  a  con- 
venient means  of  apportioning  the  interests  in  the 
company,  and  (2)  as  a  measure  of  giving  value  to  the 
enterprise.  Suppose  a  partnership  business  owned 
by  three  partners  and  valued  at  $100,000  is  to  be 
incorporated.  One  partner  owns  a  one-half  interest 
and  each  of  the  others  a  one-quarter  interest.  One 
hundred  thousand  dollars  will  be  the  capitalization  of 
the  new  corporation,  and  this  will  be  divided  into 
shares  of  equal  value.  Suppose  the  par  value  of  these 
shares  to  be  $1000  each;  there  will  then  be  a  hundred 
shares  in  all,  of  which  the  first  partner  will  receive 
fifty  and  the  other  two  partners  twenty-five  each. 
If  the  capitalization  should  be  $50,000  instead  of  a 
$100,000,  the  number  of  shares  would  be  changed, 
but  the  proportion  of  holdings  would  be  the  same. 
The  first  partner  would  have  his  one-half  interest  and 
the  other  two  each  one-quarter  interest,  as  before. 
The  basis  of  calculation  is  different,  but  the  results 
are  the  same. 

Let  us  say  an  inventor  devises  some  mechanism. 
It  is  not  demonstrated  or  patented,  but  it  probably 
exists  as  a  rude  draft  or  model.  The  device  must 
be  worked  out,  and  for  this  purpose  the  inventor  must 
secure  financial  assistance.  He  will  go  to  a  few  friends 
and  try  any  of  the  methods  already  suggested.  Sup- 
pose he  obtains  $1000  to  complete  his  invention  and 
offers  the  investors  a  one-half  interest,  reserving  the 
other  half  to  himself.  Two  or  three  of  these  people 


176  Sale  of  Inventions 

may  form  a  little  pool,  one  putting  in  $500,  another 
$400,  and  another  $100.  A  corporation  would  be 
formed.  This  corporation,  however,  cannot  be  based 
on  value,  because  real  value  of  the  untried  invention 
as  yet  hangs  in  doubt.  The  capitalization  is  simply 
made  to  measure  the  interest  of  inventor  and  investors. 
In  order  to  save  big  corporation  fees  a  small  capital- 
ization will  be  best,  say  $2000  divided  into  twenty- 
shares  at  $100  per  share.  Of  these  shares  the  inventor 
will  take  ten;  the  first  investor,  five;  the  second, 
four;  and  the  third,  one.  This  company  would  be 
looked  upon  only  as  a  temporary  bridging  arrangement 
to  carry  the  enterprise  to  a  point  where  the  value  of 
the  invention  might  be  determined.  When  the  in- 
vention is  completed  and  it  becomes  necessary  to 
increase  capitalization  in  order  to  make  it  represent 
the  real  value  of  the  invention  and  the  enterprise,  re- 
organization will  be  necessary.  /The  new  idea  of  the 
value  of  the  enterprise  comes  in.  The  capitalization 
of  $2000  no  longer  represents  value.  It  represents 
the  proportionate  holding  of  shares  by  all  the  stock- 
holders. 

It  is  necessary  to  understand  how  the  stock  is  divided 
among  the  prospective  stockholders;  also  how  the 
stock  is  to  represent  the  inventor's  real  interests. 
One  way  of  passing  a  controlling  interest  in  a  corpora- 
tion to  a  certain  class  of  stockholders  is  by  means  of 
preferred  stock.  This  is  a  better  scheme  of  raising 
money  than  the  issue  of  bonds  or  a  loan  protected 
by  securities.  An  issue  of  preferred  stock  is  preferable 
to  a  bond  issue,  because  preferred  stock  receives 
dividends  only  if  such  dividends  are  declared.  Bonds 
may  even  endanger  the  very  existence  of  the  under- 


Advertising  for  Capital  177 

taking,  for  it  is  necessary  to  take  steps  to  meet  the 
loans.  However,  sometimes  a  bond  issue  to  be  at- 
tractive is  made  profit-sharing.  It  may  be  provided 
that  in  case  preferred  dividends  are  paid  at  a  certain 
date  and  fall  in  arrears,  preferred  stock  shall  have, 
the  right  to  vote,  or  that  control  of  the  company  shall 
pass  to  the  preferred  stockholders. 

When  stock  is  issued,  it  should  be  fully  paid  and 
nonassessable.  This  encourages  subscriptions.  In  any 
event,  it  should  be  noted  that  stock  not  fully  paid, 
either  technically  or  actually,  subjects  the  party  to 
whom  it  is  issued  to  a  liability  for  the  unpaid  balance 
as  long  as  he  holds  the  stock.  The  corporation  claims 
the  payment.  The  courts  hold  the  stock  to  be  fully 
paid  if  an  invention  is  given  for  stock.  Capitalize 
in  the  right  way  and  leave  watered  stocks  alone. 
Watered  stock  means  an  increase  in  the  issue  of  capital 
stock  with  no  corresponding  increase  in  assets.  It 
is  of  no  consequence  when  used  to  place  control  in 
the  hands  of  any  class  of  stockholders. 

Investors  may  be  expected  to  make  exacting  de- 
mands. They  may  wish  to  control  the  company. 
The  control  goes  with  the  majority  of  the  stock.  The 
persons  owning  this  majority  usually  elect  the  board 
of  directors  and  through  this  board  control  the  com- 
pany. However,  the  control  of  the  corporation  may 
be  given  to  the  investors  in  different  ways: 

1.  By  giving  51  per  cent  of  voting  stock  to  the 

investors,  the  inventor  retaining  but  49  per 
cent.  This  gives  the  investors  little  more  than 
one  half  the  stock. 

2.  By  giving  an  equal  division  of  the  stock,  the 

inventor  being  deprived  of  the  voting  power. 


178  Sale  of  Inventions 

3.  By  issuing  a  portion  of  the  inventor's  stock  as 

nonvoting  preferred  stock.  This  is  not  con- 
trary to  any  laws. 

4.  The  stock  might  be  divided  equally  between  in- 

ventor and  investors,  but  the  board  of  di- 
rectors to  be  selected  acceptable  to  both  and 
the  management  to  be  left  to  a  voting  trust. 

5.  Stock   might   be   divided   equally   between   the 

two  parties,  but  so  classified  that  the  ma- 
jority of  the  directors  would  be  elected  by  the 
investors'  stock. 

The  inventor  should  always  be  careful  about  pro- 
tecting his  own  interests.  Where  the  inventor  has 
not  bound  himself  and  has  found  an  investor  or  in- 
vestors, it  is  better  for  the  parties  to  organize  a  cor- 
poration (with  the  assistance  of  a  dummy  where 
necessary),  especially  where  the  amount  needed  to 
start  business  is  considerable.  Make  a  contract  with 
the  investors  from  the  very  start,  fixing  not  only  the 
interests  involved  but  also  certain  exact  relations  and 
regulations  as  to  the  mutual  conduct  of  the  parties, 
e.g.,  that  a  certain  amount  shall  be  invested,  that 
neither  shall  sell  his  interest  save  with  the  other's 
consent,  that  the  invention  shall  be  salable,  and  that 
either  shall  agree  to  sell  his  interest  to  a  third  party 
at  a  price  fixed  in  advance.  These  and  other  contin- 
gencies can  be  provided  for. 

The  personnel  of  the  corporation  is  of  the  utmost 
importance.  The  organizers  or  controllers  of  the 
company  do  not  need  to  be  mechanics  or  persons  of 
business  prominence,  but  they  should  be  men  of  affairs 
and  able  at  least  to  know  a  good  man  when  they  see 
one.  Him  they  should  elect  as  executive  head.  Un- 


Advertising  for  Capital  179 

less  this  is  done,  if  the  stockholders  are  ignorant  of 
business  affairs  and  incompetent  to  manage  a  business 
concern  themselves  or  to  perceive  their  shortcomings 
in  this  respect,  the  concern  will  in  nine  cases  out  of 
ten  go  to  the  wall  before  it  has  been  long  in  existence. 
It  is  just  as  necessary  to  bring  in  good  judgment  with 
the  capital  as  it  is  to  start  out  with  a  good  invention, 
especially  where  the  task  is  to  reap  profit  out  of  the 
venture. 

The  board  of  directors  controls  and  guides  the 
affairs  of  the  corporation.  Its  members  are  elected 
by  the  stockholders  in  the  following  manner:  If  the 
board  of  directors  is  composed  of  five  members  and 
there  are  two  classes  of  stock,  each  class  will  be  given 
the  right  to  elect  two  directors,  and  by  agreement 
among  these  a  fifth  director  may  be  appointed.  If 
no  agreement  is  reached,  then  the  board  will  have  to 
get  along  with  four  instead  of  five  members. 

Eliminate  the  promoter  from  organizing  a  corpora- 
tion. He  may  enter  into  the  factors  that  determine 
the  capitalization  of  your  enterprise.  At  the  time  of 
the  organization  of  a  corporation,  the  equality  of  cor- 
porate assets  and  issued  stock  perhaps  holds  true; 
but  in  time,  as  business  develops,  it  does  not  ordinarily 
f  exist,  owing  to  fluctuations  in  the  value  of  stock, 
market  conditions,  etc.  Variations  between  the  value 
of  the  enterprise  and  its  capitalization  are  supposed 
to  be  reflected  with  more  or  less  accuracy  in  the  market 
quotations.  However,  value  is  the  obvious  basis  of 
capitalization.  Sometimes  the  capitalization  of  a 
new  enterprise  is  complicated  by  the  necessity  for 
payments  to  promoters.  The  inventor  should  avoid 
the  "  promotion "  idea  of  his  invention  if  he  can 


180  Sale  of  Inventions 

possibly  help  it.  Payments  to  promoters  are  necessary 
in  order  to  reward  them  for  their  services  in  bringing 
moneyed  people  together. 

Very  frequently  it  is  difficult  to  know  exactly  what 
offer  must  be  made  to  secure  money.  Sometimes 
overcapitalization  may  be  inviting  to  capitalists  even 
in  cases  where  the  inventor  gets  half  the  stock  and  the 
investor  the  other  half.  Suppose  an  invention  is 
worth  financially  $200,000  and  that  it  requires  $25,000 
for  operating  funds.  If  the  large  investors  are  ap- 
pealed to,  in  order  to  attract  them,  you  must  give 
$100,000  in  stock  or  even  more  for  the  required  $25,000 
in  cash.  If,  however,  the  investment  is  apportioned 
among  a  number  of  smaller  investors,  each  putting 
in  a  few  hundred  or  a  thousand  dollars,  it  is  probable 
that  from  $50,000  to  $75,000  face  value  of  stock  or 
less  would  be  enough  to  raise  the  money.  Under  this 
second  plan  the  stock  given  for  the  money  would  be 
at  least  $25,000  less  than  under  the  first.  Against  this, 
however,  must  be  set  the  additional  trouble  of  reach- 
ing smaller  investors.  In  either  case,  if  services  of 
promoters  are  necessary,  the  cost  of  getting  money 
will  be  increased  by  the  amount  given  these  promoters, 
the  value  of  the  owner's  interest  diminishing  as  the 
amount  of  stock  given  for  the  money  increases. 

In  capitalizing  enterprises  founded  on  inventions,  the 
anticipation  of  earning  power  is  customary.  Any 
close  estimate  of  these  anticipated  profits  is,  of  course, 
impossible.  The  capitalization  must  be  large  enough 
to  take  into  consideration  future  emergencies.  Profit 
probabilities  are  usually  capable  of  approximation. 
Profit  possibilities  are  not,  as  the  grounds  of  expecta- 
tion are  too  uncertain,  too  remote,  or  too  unknown. 


Advertising  for  Capital  181 

Selling  stock  is  about  the  hardest  nut  the  inventor 
has  to  crack.  Investors  may  fool  the  inexperienced 
inventor  into  believing  that  they  are  organizing  a 
corporation  when,  in  fact,  nothing  of  the  sort  is  done. 
It  is  necessary  here  to  untie  a  knot.  If  the  investor 
demands  a  nonvoting,  nonparticipating  preferred  stock, 
or  perhaps  an  issue  of  bonds  to  represent  the  actual 
money  invested,  the  undertaking  is  not  in  the  nature  of 
stock  investment  but  is  rather  a  loan,  a  fixed  charge 
and  liability  imposed  upon  the  assets  of  the  corporation. 
Of  course,  the  investors  receive  dividends  and  interest 
and  finally  receive  their  money  back.  Capital  ex- 
pressed in  shares  of  stock  is  thus  different  from  a  loan 
expressed  in  bonds. 

Capitalization  is  defined  as  the  face  or  par  value 
of  the  stocks  and  bonds  which  the  corporation  has 
issued.  In  every  state  of  the  union  the  laws  provid- 
ing for  incorporation  either  directly  or  indirectly 
require  the  corporation  to  have  a  specified  capital 
stock.  The  amount  of  this  capital  is,  in  most  states, 
fixed  by  the  charter  of  the  corporation.  The  parties 
to  the  incorporation  determine  this  before  application 
is  made  for  a  charter.  It  represents  the  amount  of 
money  which  the  incorporators  think  necessary  for 
the  successful  operation  of  the  enterprise.  Thus  if 
they  capitalize  at  $25,000,  presumably  they  either 
consider  this  amount  of  stock  requisite  to  the  pur- 
poses of  the  undertaking  or  believe  that  dividends  can 
be  paid  upon  that  amount. 

In  certain  states  a  certain  proportion  of  the  capital 
stock  must  be  paid  in.  It  must  have  been  issued  for 
value  received  by  or  for  the  corporation  prior  to  the 
act  of  incorporation  or  before  it  begins  business.  Thus 


1 82  Sale  of  Inventions 

in  Maryland  one  fourth  of  the  capital  stock  must  be 
paid  within  one  year  of  incorporation,  and  in  New 
York  one  half  must  be  paid  within  the  same  time. 
It  is  usually  sufficient,  however,  if  that  payment  be 
made  in  property  or  services.  In  the  District  of  Co- 
lumbia the  provisions  are  more  severe.  Here  the 
entire  capital  stock  must  be  subscribed  for  in  good 
faith,  but  ten  per  cent  of  these  subscriptions  must 
be  paid  in  cash  in  good  faith  before  the  charter  is  even 
filed.  So  it  is  necessary  to  consult  the  state  laws 
concerning  the  full  payment  of  all  issued  stocks. 
Every  dollar  of  outstanding  stock  is  supposed  to  rep- 
resent a  dollar  of  value  actually  received  by  the  cor- 
poration. 

Raising  capital  for  stock  is  easiest  when  your  friends 
or  business  associates  will  subscribe.  Always  con- 
sider whether  interested  stockholders  will  be  a  help 
to  your  enterprise.  A  plumber  decided  to  raise 
capital  to  finance  his  invention.  He  had  some  re- 
sources of  his  own  and  could  have  raised  the  necessary 
money  by  borrowing  on  his  collateral  and  on  personal 
notes.  He  reasoned,  however,  that  if  he  should  form 
a  corporation  and  sell  the  stock  to  the  plumbers  in 
the  district  where  he  expected  to  do  business,  the 
success  of  his  venture  would  be  assured.  The  plan 
succeeded.  The  users  of  the  company's  product  were 
directly  interested  in  its  welfare.  Their  support  alone 
secured  enough  business  to  establish  the  enterprise. 

Again  and  again  do  "  ads  "  appear  in  the  papers 
calculated  to  raise  money  for  stock  incorporations. 
Take  into  consideration  that  some  men  buy  stock 
because  their  friends  buy.  Selling  stocks  by  means 
of  expensive  prospectuses  has  already  been  discussed. 


Advertising  for  Capital  183 

The  smart  stock  salesman  never  asks  for  all  the  money 
at  once.  It  is  usually  the  case  of  ten  per  cent  down, 
balance  in  installments.  The  investor  always  has  an 
eagle  eye  for  the  safety  of  his  principal.  He  wants 
profits.  If  you  are  well  informed,  you  will  sell  stocks 
easily.  The  investor  will  not  ask  you  one  tenth  the 
number  of  questions  if  he  sees  that  you  understand  the 
subjects  with  which  you  should  be  familiar.  There 
are  many  inducements  held  out  to  prospective  stock- 
holders for  buying  stock.  Let  the  prospective  investor 
have  the  opportunity  of  investing  at  ground  floor 
prices.  Do  not  ask  par  for  a  corporation  just  begin- 
ning. Start  a  limited  number  of  shares  at  a  fair  price 
and  create  a  market  for  them  through  circularizing. 
You  can  then  offer  the  next  allotment  at  an  advanced 
price.  Treat  the  investors  rightly.  Give  them  a 
square  deal  for  their  money. 

In  due  time  a  corporation  organized  under  excellent 
business  managers,  pushed  forward  in  a  good  market, 
and  meeting  with  satisfied  consumers,  will  "  cut  a 
melon,"  which  means  that  the  corporation  will  make 
an  extra  distribution  to  its  stockholders.  This  takes 
the  form  of  an  extra  large  cash  or  stock  dividend. 


CHAPTER  XIX 

SALESMANSHIP  AND  BUSINESS  — 
GENERAL   CONSIDERATIONS 

QUESTIONS  of  policy  arising  in  the  course  of 
marketing  an  invention  must  be  considered 
upon   the   broad   lines   of   salesmanship    and 
business.    As  a  knowledge  of  the  principles  of  busi- 
ness with  their  peculiar  bearing  upon  patents  is  of 
the  utmost  benefit  to  every  inventor,  it  calls  for  sep- 
arate mention  in  this  work.    This  chapter  deals  with 
the  salability  of  an  invention.    A  machine  can  be 
made  to  do  almost  anything  but  sell  goods. 

In  every  sale,  three  factors  are  to  be  considered:  (i) 
the  goods,  (2)  the  salesman,  (3)  the  buyer.  A  sales 
talk  is  anything  communicated  or  issued  having  as 
its  object  the  making  of  a  sale.  Before  you  are  ready 
to  effect  the  sale  of  any  article,  your  proposition  must 
be  just  right.  The  man  who  thinks  seriously  all 
around  his  proposition,  who  studies  every  objection  that 
can  possibly  arise,  who  sees  mentally  the  temper 
of  his  prospect  and  adjusts  himself  to  it,  is  the  sales- 
man who  will  bubble  over  with  enthusiasm,  energy, 
and  determination  which  the  prospect  will  find  it 
difficult  to  resist.  Every  proposition  must  be  resolved 
into  its  elements.  If  you  do  not  grasp  your  propo- 
sition yourself,  how  do  you  expect  to  make  it  clear 
to  your  prospect?  Understand  that  every  sale  is  made 
in  the  mind.  Four  steps  constitute  every  sale:  at- 

184 


Salesmanship  and  Business  185 

tention,  interest,  desire,  and  decision.  Selling  re- 
quires a  knowledge  of  the  working  of  the  human  mind. 
You  must  make  your  prospect  think  as  you  would 
have  him  think,  and  you  must  know  what  thoughts 
will  produce  the  right  kind  of  action.  You  must  use 
suggestion  in  getting  your  prospect  to  display  the 
right  mental  action,  which  may  be  instantaneous  or 
require  time.  When  you  make  a  sale,  you  make  it 
because  of  what  your  customer  thinks.  He  must 
be  made  to  give  a  willing  ear.  To  be  successful  you 
must  understand  the  line  of  thinking  that  will  make 
him  buy. 

Any  salesman  knows  the  importance  of  obtaining 
the  right  attitude  of  a  prospect  before  making  a 
sale.  Always  get  the  buyer's  point  of  view.  Shape 
your  selling  talk  so  that  you  can  change  from  one 
motive  to  another  instantly.  There  are  generally  a 
number  of  motives  that  will  prompt  people  to  buy  any 
line  of  goods.  You  can  generally  find  out  what  a 
man's  experiences  have  been  before  you  have  gone 
very  far  with  your  talk,  provided  you  give  him  an 
opportunity  to  tell  you. 

In  trying  to  influence  men,  you  may  feel  your 
prospect  working  with  you  or  against  you.  You 
test  the  springs  of  action.  The  man  who  can  hide 
his  thoughts  is  generally  the  man  who  figures  and 
deliberates.  He  is  a  sound  and  logical  reasoner  and 
generally  successful  in  business.  The  voice  is  the 
most  important  factor  in  making  a  sale.  When  you 
make  a  statement  to  the  average  man,  look  him  straight 
in  the  eye.  You  may  use  your  hands  in  making  ap- 
propriate gestures;  you  cannot  avoid  doing  so  at 
times.  A  hearty  handshake  is  an  effective  gesture. 


1 86  Sale  of  Inventions 

Don't  be  afraid  to  offer  your  hand  to  a  magnate  or 
a  banker,  as  you  have  no  reason  to  hang  your  head  in 
approaching  him.  Your  voice  is  oftentimes  your 
best  ally.  The  better  command  of  language  you  have, 
the  better  will  your  voice  be  adapted  to  influence 
people.  In  building  your  talk,  select  your  words  with 
care. 

Let  your  prospect  talk,  but  be  sure  you  hold  him  to 
a  well-defined  line  of  talk.  Keep  him  upon  your 
ground.  It  does  not  always  take  argument  to  sell 
goods,  but  it  most  often  takes  originality  and  deep, 
genuine  thinking  on  the  part  of  the  salesman.  Be 
prepared  to  get  interest  in  the  face  of  objections. 
While  getting  up  interest,  don't  mention  price.  Al- 
ways talk  for  your  prospect's  interest.  From  the  very 
start  show  that  it  is  for  his  interest  you  are  working 
and  not  for  your  own  alone,  that  your  motive  is 
not  a  wholly  selfish  one,  that  you  are  not  only  selling 
him  an  interest  in  your  invention,  but  that  you  intend 
to  stand  back  of  him  with  the  right  kind  of  service 
and  see  that  the  invention  sells.  This  will  be  a  clincher. 

You  cannot  talk  intelligently  about  an  article  un- 
less you  understand  how,  when,  and  where  it  was 
made.  You  cannot  always  tell  whether  your  prospect 
is  interested  simply  because  he  watches  you  and  pays 
strict  attention  while  you  are  giving  your  selling  talk. 
If  a  question  is  properly  asked,  it  will  give  you  a  fairly 
good  idea  of  the  mental  attitude  of  your  prospect,  how 
much  he  knows,  and  how  he  feels  about  it.  You  have  to 
go  at  it  single-handed.  Don't  do  all  the  talking  your- 
self, and  don't  let  him  do  it  all.  If  he  will  not  talk, 
fire  a  battery  of  questions  at  him.  If  he  talks  too 
much,  take  the  initiative  and  don't  give  him  a  chance. 


Salesmanship  and  Business  187 

You  must  make  your  prospect  conceive  the  whole 
proposition  in  the  early  part  of  your  talk.  Never 
let  any  man  tell  you  anything  about  your  own  goods. 
You  are  supposed  to  know  more  about  them  than  any- 
body else,  and  you  must  convince  your  prospect  that  you 
do.  When  you  bring  forth  something  that  pleases, 
the  facial  expressions  will  indicate  it;  if  it  is  something 
that  displeases,  you  will  also  notice  it.  Do  not  let 
him  put  you  on  a  false  scent. 

In  making  your  approach,  make  it  in  such  a  manner 
that  your  prospect  does  not  feel  that  you  are  after 
his  pocketbook,  that  he  is  expected  to  buy  something. 
Seventy-five  per  cent  of  salesmen  fail  to  get  attention 
because  they  either  do  not  know  or  otherwise  disregard 
this  simple  precept.  Your  prospect  passes  judgment 
on  you  and  your  proposition  within  sixty  seconds 
after  he  meets  you.  You  must  see  the  necessity  of 
getting  on  the  prospect's  side  of  the  fence.  In  making 
your  approach,  consider  the  temperament  of  the  man, 
his  education,  environment,  and  profession.  Deter- 
mine his  point  of  view  in  advance,  and  you  will  have 
a  better  chance  of  landing  him.  You  must  be  needle- 
witted. 

Getting  conviction  is  harder  than  arousing  interest. 
It  is  the  last  step  in  making  a  sale  which  wins.  You 
should  be  able,  while  giving  your  arguments,  to  find 
the  real  motive  that  will  pull  your  prospect  across.  It 
is  easier  to  combat  a  thought  before  it  is  uttered  than 
afterward.  To  get  conviction,  you  must  dwell  on 
each  point  until  your  prospect  is  absolutely  convinced 
before  you  pass  to  another.  If  you  endeavor  to  show 
that  your  prospect  is  wrong,  you  can  do  it  only  by  argu- 
ment. If  you  fail  to  convince  his  judgment,  you  fail 


1 88  Sale  of  Inventions 

to  get  action.  Conviction  is  the  result  of  understand- 
ing and  understanding  is  the  result  of  knowledge. 
You  must  apply  this  knowledge  in  a  logical  manner. 
Your  prospect's  questions,  his  facial  expressions,  his 
conversation,  will  all  give  you  an  idea  as  to  what  his 
past  experiences  have  been.  They  will  tell  you  whether 
or  not  it  is  necessary  to  use  argument. 

Be  sure  you  keep  him  thinking  as  you  want  him  to 
think.  Be  sure  you  hold  his  attention  every  moment. 
If  your  invention  has  no  particular  advantage,  over 
your  competitors,  you  will  find  it  impossible  to  create 
a  desire  on  the  part  of  an  experienced  buyer.  Know 
your  talk  thoroughly;  study  your  prospect;  gauge 
him  carefully;  introduce  your  profit  talk  tactfully  to 
his  notice;  build  your  talk  step  by  step  until  you  have 
created  the  right  moment  to  get  him  to  resolve  to  put 
up  the  money. 

Whether  you  intend  to  make  a  sale  by  a  personal 
call  or  through  correspondence,  you  should  classify 
your  prospects.  As  human  nature  does  not  vary 
greatly,  an  unfavorable  approach  will  produce  an  un- 
favorable decision.  After  you  have  found  the  men 
who  will  buy  your  goods,  divide  them  into  groups, 
arranging  the  groups  so  you  can  get  the  professional 
men  in  one  section,  the  laborers  in  another,  the  farmers 
in  a  third,  etc.  You  will  have  to  tone  your  letter 
differently  in  each  case. 

Have  a  definite  business  policy  in  selling  your  goods. 
The  idea  of  Wanamaker  is,  "  All  may  help,  none 
shall  hinder."  You  should  standardize  the  best  way 
in  which  to  sell  goods.  When  you  have  to  hire  sales- 
men, get  specialty  salesmen,  those  who  are  masters 
of  their  field.  The  salesman  of  an  adding  machine 


Salesmanship  and  Business  189 

cannot  sell  successfully  both  to  bankers  and  to  retailers; 
electrical  equipment  companies  find  that  one  man 
cannot  sell  both  generators  and  electric  light  bulbs. 

Marshall  Field  said,  "  The  customer  is  always 
right." 

You  must  keep  everlastingly  at  it  and  push  your 
business.  Don't  get  discouraged.  After  all,  a  man 
gets  just  what  he  deserves.  If  he  wants  business, 
he  has  got  to  pick  it  up.  Every  large  and  successful 
advertising  campaign  has  been  based  on  the  idea  that 
people  will  buy  if  the  suggestion  to  buy  is  made  strong 
enough. 


CHAPTER   XX 

SIZING   YOURSELF   UP  AS  A   BUSINESS 

MAN 

t  |  ^HERE  is  one  great  reason  for  your  failure  to 
obtain  capital  to  push  your  invention  to  a 
successful  termination.  It  is  a  lack  of  detailed 
knowledge  of  what  steps  to  take  to  be  reasonably 
sure.  You  have  been  a  waiter  on  Providence.  The 
other  hindrances  will  pale  into  insignificance  beside 
this  one  great  bar  to  progress.  You  must  know  how; 
then  you  can  help  yourself  and  will  not  always  have 
to  depend  upon  others.  You  must  draw  yourself 
up  to  your  full  height.  If  you  are  sure  that  you 
will  not  make  a  good  business  man,  choose  a  good 
manager,  and  enlist  capital  from  business  men  who 
are  good  organizers.  To  secure  a  good  manager  is 
not  an  easy  matter.  Good  managers  are  constantly 
employed  and  are  not  looking  around  for  new  open- 
ings. An  inventor  should  always  remember  that  a 
business  concern  with  an  up-to-date  selling  organiza- 
tion will  probably  sell  more  of  the  products  than  a 
poorly  organized  company.  Thus  the  total  amount 
of  royalty  received  per  year  from  a  large  sale  of  in- 
ventions may  lie  even  greater  under  a  small  than 
under  a  large  royalty. 

As  a  rule  it  can  be  quickly  ascertained  whether  an 
inventor  is  a  good  business  man  by  finding  out  what 
his  attitude  is  as  to  estimating  royalties  and  his  knowl- 

190 


Sizing  Yourself  Up  as  a  Business  Man    191 

edge  as  to  what  enters  into  consideration  in  fixing 
royalties.  The  sum  total  of  all  the  pointers  con- 
tained in  this  book  will  not  avail  the  inventor  if  he 
fails  to  understand  that  royalties  are  based  on  a  pro- 
portion of  the  net  profits  which  are  expected  to  accrue 
from  the  sale  of  the  invention.  He  must  remember 
that  the  term  "  net  profit  "  means  the  amount  which 
remains  after  deducting  from  the  gross  profits  (the 
difference  between  factory  cost  and  selling  price) 
the  cost  of  conducting  the  administrative  end  of  the 
business.  For  example,  if  the  factory  cost  plus  royalty 
of  a  patented  lock  is  2off  and  it  sells  for  50^,  a  gross 
profit  of  30^  is  made.  But  the  factory  cost  is  not  the 
true  cost.  To  this  figure  must  be  added  the  cost  of 
doing  business,  such  as  office  expenses,  salaries  of 
officials,  cost  of  advertising,  salesmen's  salaries  plus 
expenses,  and  whatever  losses  are  caused  by  bad 
accounts.  Assume  that  this  amount  represents  20  per 
cent  of  the  selling  price,  i.e.,  zoff.  This  amount,  added 
to  the  factory  cost,  would  make  the  true  cost  3off. 
In  other  words,  instead  of  making  3Off,  as  the  gross 
profit  would  indicate,  the  net  profit  is  but  20ff,  or  33^ 
per  cent  less  than  the  gross  profit.  That  is  the  way 
a  level-headed  business  man  would  view  the  situation. 
No  country  ever  furnished  such  favorable  condi- 
tions as  this  great  land  of  ours  for  starting  a  business 
in  a  small  way  and  building  it  up  rapidly.  One 
requisite  is  experience;  the  other,  taste  or  adapta- 
bility. If  you  have  no  natural  liking  for  any  busi- 
ness and  it  is  out  of  your  reckoning,  do  not  go  into 
it  with  your  own  or  somebody  else's  money.  It  is  no 
credit  to  waste  the  other  man's  money.  It  will  never 
do  to  take  chances.  If  you  do  not  understand  the 


192  Sale  of  Inventions 

business,  you  can  hire  some  one  who  does.  The  more 
a  man  knows,  the  more  confident  he  ought  to  be  in 
his  own  field. 

There  is  no  mystery  about  selling  your  invention. 
A  man  loses  force  when  he  lets  himself  become  con- 
fused by  the  bigness  or  the  complexity  of  the  things 
around  him.  A  young  man  came  from  a  country 
town  to  a  great  city.  He  was  at  first  greatly  be- 
wildered by  the  tall  buildings.  In  every  business 
house  he  entered,  he  was  confused  by  its  extent  and 
complexity.  The  bigness  of  things  overpowered  him 
and  made  Him  feel  uncomfortably  insignificant.  But 
one  day  as  he  stood  looking  at  one  of  the  tall  build- 
ings, he  reasoned  that  it  was  merely  a  pile  of  bricks 
placed  one  on  top  of  the  other.  Men  like  himself 
had  put  it  up.  The  plan  was  great;  the  plan  was 
a  thought  which  enabled  him  to  learn  to  think.  In- 
stantly the  mystery  of  the  tall  building  was  gone  and 
the  bigness  of  things  ceased  to  overpower  him.  He 
succeeded  partly  because  he  had  learned  that  cities 
are  built  a  brick  at  a  time  and  that  even  the  greatest 
of  things  are  not  mysterious  when  we  reason  them 
out.  He  himself  had  raised  up  the  curtain. 

When  you  are  seeking  to  interest  men  in  starting 
you  in  business  by  furnishing  capital,  you  are  trying 
to  sell  a  part  of  the  future  products  of  your  brain  for 
a  consideration.  If  you  are  a  man  of  the  best  quality, 
you  will  stand  squarely  on  your  legs.  The  better 
salesman  you  are,  the  better  are  your  chances  to  win. 
You  must  understand  the  fundamental  principles  of 
salesmanship  and  have  infinite  capacity  for  details. 
You  have  perhaps  felt  sure  that  you  could  not  raise 
the  capital  yourself.  You  may  feel  the  lack  of  knowl- 


Sizing  Yourself  Up  as  a  Business  Man     193 

edge  or  experience,  therefore  you  must  seek  help. 
You  can  become  independent  of  one  kind  of  work 
only  by  learning  how  to  do  another  kind.  You  must 
put  every  ounce  of  your  energy  into  the  crucible. 

Inventing  is  a  business  like  everything  else.  The 
key  to  your  achievement  is  your  ability  to  wield  in- 
fluence over  men.  If  you  want  the  confidence  of  men, 
you  must  give  ample  proof  that  you  deserve  it.  Idle 
money  never  made  any  one  rich.  You  must  set  it 
at  work.  Generally  "  luck  "  is  merely  the  result  of 
foresight  and  nerve.  You  must  lock  the  wheel  of 
fortune  when  it  reaches  you.  Follow  your  own  judg- 
ment; as  a  rule  it  will  be  right.  The  distinction  be- 
tween the  successful  and  the  unsuccessful  man  is  that 
the  man  of  success  knows  not  only  the  value  but  the 
necessity  of  action.  With  him  to  wish  is  to  act. 

Pattern  your  efforts  after  men  who,  as  inventors, 
have  made  good  as  business  men  and  whose  products 
have  founded  industries.  There  is  the  rub:  The 
vast  majority  of  practical  inventions  are  made  by 
men  of  whom  the  public  never  hears.  There  should 
be  a  way  to  make  them  known.  Mr.  Edison  is  a  type 
of  inventor  who  has  the  money  idea  of  any  invention. 
It  was  pounded  into  him  by  very  severe  knocks. 
You  must  have  imagination  in  this  line  of  work  —  this 
more  than  technical  experience.  Don't  be  a  machine 
for  others  all  the  time.  Take  all  the  advantages 
offered  for  betterment.  Now  or  never! 

If  your  invention  has  merit,  don't  be  afraid  to  push 
it  for  all  it  is  worth.  The  business  world  is  searching 
with  a  lantern  for  men  with  an  original  as  well  as  a 
practical  frame  of  mind.  Hold  yourself  in  readiness 
for  your  main  chance.  "  The  biggest  asset  of  any 


194  Sale  of  Inventions 

big  industrial  corporation  to-day, "  said  the  chief  of 
the  engineering  corps  of  a  great  corporation,  "is  to 
obtain  men  of  the  right  sort."  "  The  right  sort "  is 
denned  as  follows:  "  It  is  easy  for  us  to  get  good, 
faithful,  plodding  scientists.  They  all  have  their 
place  and  we  could  not  do  without  them.  But  the 
difficult  thing  is  to  get  men  who  think  differently  from 
other  men,  who  do  not  follow  precedent  but  will  strike 
out  new  and  original  lines  for  themselves.  Out  of  these 
men,  we  get  our  development"  He  is  referring  to  in- 
ventors, men  who  do  not  tread  beaten  paths. 

Start  up  and  do  something,  and  forget  everything 
else.  If  you  are  past  your  prime  and  enjoy  a  good 
state  of  health,  get  started.  Have  you  done  the 
biggest  things  you  are  capable  of  doing?  How  long 
have  you  been  just  an  ordinary  employee?  Do  you 
realize  that  habit  is  getting  a  tremendous  grip  on 
you?  Are  you  just  waiting?  For  what?  Orison 
Swett  Marden,  whose  "  Success  "  books  have  stimu- 
lated many  men  in  different  walks  of  life,  says  in  his 
book  entitled  "  The  Victorious  Attitude  "  :  "  There 
are  thousands  of  devices  in  the  Patent  Office  in  Wash- 
ington which  have  never  been  of  any  use  to  the  world 
simply  because  the  inventors  did  not  cling  to  their 
vision  long  enough  to  materialize  them  in  perfection. 
They  became  discouraged.  They  ceased  their  efforts. 
They  let  their  vision  fade  and  so  became  deenergized 
and  lost  the  power  to  realize  them.  Other  inventors 
have  taken  up  many  such  '  near '  successes,  added 
the  missing  links  in  their  completion  and  have  made 
them  real  successes."  The  secret  of  all  this,  you 
will  find,  is  to  make  a  profit  from  the  labor  of  others. 
Use  your  head.  It  is  there  for  that  purpose.  Do 


Sizing  Yourself  Up  as  a  Business  Man      195 

both  the  planning  and  executing  for  a  while,  then  let 
others  execute  while  you  provide  the  sinews  of  busi- 
ness. This  is  called  "  knowledge  of  the  world  of 
affairs." 


CHAPTER  XXI 
ELEMENTARY  CONTRACT  LAWS 

THERE  are  certain  principles  of  law  which  every 
inventor  should  know  and  apply  in  the  course 
of  his  dealings  with  financial  people  in  order 
that  no  unfair  advantage  be  taken  over  him  by  men 
big  in  the  commercial  field.     They  relate  to  the  mak- 
ing and  execution  of  valid  contracts.    It  is  hoped  that 
the   inventor   will   familiarize   himself   therewith,    as 
there  are  times  when  he  may  not  have  the  opportunity 
to  consult  a  lawyer. 

The  rules  of  law  governing  contracts  are  of  great 
importance  to  the  inventor,  just  as  they  are  to  every 
business  man.  This  consideration  of  law  forms  an 
important  part  of  every  discussion  of  points  relative 
to  exploiting  inventions.  You  must  know  the  various 
ways  of  interesting  capital  and  their  several  advan- 
tages and  objections,  because  it  is  in  just  this  con- 
nection that  a  great  many  inventors  make  a  fatal 
slip.  There  have  been  numerous  suits  between  li- 
censers and  licensees  owing  to  misunderstandings  of 
agreements  or  contracts.  Most  of  these  could  have 
been  prevented  if  care  had  been  taken  before  the 
contract  was  drawn  to  make  sure  that  the  "  minds 
of  both  parties  met,"  as  the  legal  term  puts  it.  Those 
who  make  contracts  should  know  law  in  order  to  be 
exempt  from  mistrust. 

196 


Elementary  Contract  Laws  197 

In  every  contract  and  in  every  sale  there  must  be 
an  offer  and  an  acceptance.  The  minds  of  the  two 
parties  to  the  sale  must  have  met  on  a  specific  object. 
You  may  agree  with  your  merchant  to  take  a  suit  of 
clothes  at  a  specific  price.  There  has  been  an  offer 
and  an  acceptance,  and  the  minds  of  the  parties  have 
met.  The  sale  is  complete,  although  no  money  has 
yet  passed  and  the  suit  is  not  in  your  possession.  The 
acceptance  of  the  offer  must  be  absolute  and  in  ac- 
cordance with  its  terms.  In  the  above  illustration, 
if  the  merchant  offered  you  a  suit  for  $35  and  you 
offered  him  $30  for  it,  the  contract  is  not  complete 
and  there  is  no  sale,  because  you  are  introducing  new 
conditions  into  the  contract.  Even  if  you  return 
later  in  the  day  and  agree  to  take  the  suit  at  $35,  you 
cannot,  if  the  merchant  refuses,  compel  performance, 
as  you  failed  to  accept  his  original  offer. 

Brown  might  offer  to  sell  you  his  house  for  $1000. 
You  accept  his  offer  provided  he  will  take  $300  down 
and  your  30-day  note  for  the  balance.  This  is  a  qual- 
ified acceptance  and  does  not  constitute  a  contract. 

The  Offer  must  actually  be  Communicated  to  the 
Party  Accepting  It  in  order  to  Meet  the  Requirements 
of  the  Law.  —  If  the  offer  reaches  the  second  party  in 
an  indirect  way,  the  offerer  is  not  bound  to  perform. 
Thus  A.  may  offer  to  sell  B.  his  horse  for  $100.  B. 
refuses  but  tells  C.  about  it  and  C.  accepts  the  offer. 
A.  is  not  compelled  to  sell  the  horse  to  C.  However, 
if  his  offer  is  made  to  the  public,  then  any  man  meet- 
ing the  requirements  of  the  offer  can  compel  A.  to 
perform. 

As  a  general  rule  the  acceptance  must  be  made  in 
the  manner  in  which  the  offer  is  made.  If  the  offer 


198  Sale  of  Inventions 

is  made  through  the  medium  of  a  letter,  the  acceptance 
should  be  made  in  the  same  way.  This  also  applies 
to  a  telegram.  If  the  offer  is  made  by  mail  and  the 
acceptance  is  made  either  by  messenger,  telegraph, 
or  telephone,  provided  the  means  of  acceptance  is 
speedier  than  the  mode  of  offer,  the  contract  is  valid. 
If  you  accept  a  contract  by  mail,  it  is  complete  as  soon 
as  you  mail  the  letter.  Even  though  the  letter  be 
lost,  the  contract  is  valid,  and  the  offerer  has  no  right 
to  sell  the  goods.  If  he  does  so,  you  can  compel  him 
to  perform  or  sue  him  for  damages.  He  may  protect 
himself,  however,  by  stipulating  that  the  contract 
shall  not  go  in  effect  until  the  acceptance  has  actually 
been  received  by  him  or  he  may  designate  a  time  limit. 
It  practically  comes  to  the  same  thing.  If  I  offer  you 
a  thousand  yards  of  woolen  cloth  at  50j£  a  yard  to 
hold  good  for  ten  days,  you  may  accept  it  at  any  time 
within  the  ten  days.  If  you  mail  your  acceptance  on 
the  evening  of  the  tenth  day,  the  contract  is  binding. 

Silence  as  Acceptance.  —  The  offer  may  be  with- 
drawn at  any  time  before  it  has  been  accepted.  How- 
ever, if  it  was  accepted  before  it  was  withdrawn,  the 
contract  is  complete,  even  though  the  offerer  has  not 
yet  received  the  acceptance.  If  a  consideration  is 
paid  to  hold  the  offer  open  for  specified  time,  the 
offerer  cannot  sell  until  the  expiration  of  that  time. 

Rights  of  an  Agent.  —  If  you  are  acting  as  an  agent 
of  a  firm,  any  contract  made  by  you  will  be  binding 
on  the  company,  even  though  you  happen  to  be  a 
minor.  If  you  are  clothed  with  authority  to  sell 
certain  goods  and  quote  certain  discounts  and  these 
are  accepted  by  the  buyer,  the  contract  is  valid  and 
binding  although  you  may  orally  stipulate  that  those 


Elementary  Contract  Laws  199 

figures  will  be  subject  to  the  approval  of  the  house. 
The  mere  fact  that  you  are  clothed  with  the  authority 
to  quote  the  discounts  and  that  there  has  been  an 
offer  and  an  acceptance  made  in  good  faith,  makes  the 
contract  binding. 

Consideration.  —  In  order  that  your  contract  may 
be  valid,  there  must  be  some  consideration,  although 
if  the  contract  has  been  fully  performed  by  both 
parties,  it  will  not  be  set  aside  merely  because  there 
is  a  lack  of  consideration.  The  mere  fact  that  you 
make  a  promise  to  give  certain  articles  to  another 
party,  is  not  necessarily  binding  on  you.  However, 
if  the  gift  has  already  been  made,  it  cannot  be 
revoked. 

Valuable  Consideration.  —  The  consideration  must 
have  real  value.  It  is  not  necessary  for  it  to  be  equal 
to  that  offered,  but  in  law  it  must  have  some  value, 
because  it  would  be  impossible  for  the  courts  to  tell 
whether  or  not  a  thing  has  the  value  it  is  supposed 
to  have.  If  I  am  indebted  to  you  for  $100,  I  might 
send  you  $50  and  if  you  agree  to  accept  this  for  the 
account  in  full,  you  may  later  collect  the  other  $50. 
However,  if  I  send  you  $50  and  any  article  regardless 
of  what  its  value  may  be,  and  you  accept  it,  the  claim 
is  considered  settled.  If  you  make  a  promise  to  ex- 
tend my  period  of  credit  for  six  months  longer  after 
the  obligation  becomes  due,  the  promise  is  void  unless 
I  pay  some  consideration  in  lieu  of  it. 

A  contract  need  not  always  be  in  writing  except 
when  we  deal  in  lands,  where  it  is  an  assignment  in- 
tended to  be  recorded  in  the  United  States  Patent 
Office,  and  in  all  cases  where  the  law  provides  that 
instruments  shall  be  in  writing.  However,  under  the 


2OO  Sale  of  Inventions 

Statute  of  Frauds  a  contract  not  to  be  performed 
within  one  year  must  be  in  writing.  The  Statute  of 
Frauds  also  provides  that  any  agreement  to  answer 
for  the  debts  or  defaults  of  another  must  be  in  writing. 
If  John  Brown  enters  Smith's  store  and  remarks, 
"  Sell  to  Jones  or  any  member  of  his  family  all  the 
groceries  he  needs  and  I  will  pay  for  them,"  this  con- 
tract need  not  be  in  writing.  But  should  Brown  say, 
"  Let  Jones  have  all  the  groceries  he  needs,  and  I  will 
pay  for  them  if  he  does  not"  this  contract,  under  the 
Statute  of  Frauds,  must  be  in  writing. 

Fraud.  —  Where  there  is  real  fraud  entering  into 
the  contract  —  it  makes  no  difference  whether  it  is 
on  the  part  of  the  offerer  or  the  one  who  accepts  — 
the  fraudulent  party  is  liable  in  tort.  If  you  are  a 
salesman  and  make  a  false  statement,  knowing  it  to 
be  false,  you  will  be  held  accountable  for  it.  If  you 
make  a  false  statement  believing  it  to  be  true,  you 
will  not  be  held  for  fraud.  If  the  party  who  has  been 
defrauded  accepts  any  of  the  benefits  of  the  contract, 
the  court  will  offer  him  no  redress. 

Contracts.  —  The  contract  may  also  be  oral.  It 
may  be  an  implied  contract.  In  order  to  make  an 
implied  contract  valid,  it  must  be  not  merely  a  mental 
determination  on  the  part  of  the  second  party  to 
accept,  but  must  include  some  action  to  show  that 
he  intends  to  do  so. 

Title.  —  It  is  important  to  know  when  a  title  passes 
in  a  sale.  When  you  go  to  a  clothing  firm,  select  a 
certain  suit,  and  agree  to  pay  $35  for  it,  then  as  soon 
as  the  offer  has  been  made  and  you  have  accepted 
the  suit,  the  title  passes  immediately,  although  you 
have  paid  no  money  and  have  not  got  the  suit.  How- 


Elementary  Contract  Laws  201 

ever,  if  the  firm  agrees  to  alter  the  suit  in  any  respect, 
the  title  to  the  goods  will  not  pass  until  such  alteration 
has  been  made. 

Making  a  Change  before  Delivery.  —  Where  there 
is  a  contract  for  the  sale  of  specific  goods  and  the  seller 
is  bound  to  do  something  to  the  goods  before  delivery, 
the  title  to  them  does  not  pass  until  the  change  has 
been  made.  You  may  purchase  an  auto  and  agree 
to  pay  two  thousand  dollars  for  it  with  the  stipulation, 
however,  that  your  monogram  is  to  be  painted  on  the 
door  of  the  machine  or,  perhaps,  that  the  tires  are  to 
be  changed.  The  title  does  not  pass  until  such  changes 
have  been  made. 

Sales.  —  In  making  a  sale  by  sample,  there  is  al- 
ways an  implied  warranty  that  the  goods  will  be 
salable  and  merchantable. 

Breach  of  Contract.  —  It  is  not  unusual  to  find  a 
case  in  which  one  of  the  parties  to  a  contract  of  sale 
will  not  perform  his  part  either  because  it  is  oppressive 
or  for  other  reasons.  The  question  then  arises:  "  What 
are  the  respective  rights  of  each  of  the  parties  under 
these  circumstances? "  The  purchaser  may  refuse 
to  perform  his  part  of  the  contract  by  declining  to 
receive  the  goods,  or  after  the  goods  have  been  received, 
by  declining  to  pay  for  them.  In  case  the  title  has  not 
yet  passed  to  the  purchaser  and  he  has  not  received 
the  goods  and  if  he  still  refuses  to  accept  them,  the 
seller  may  avail  himself  of  either  of  the  three  follow- 
ing remedies:  (i)  He  may  resell  the  goods  after  first 
actually  tendering  them  to  the  purchaser;  (2)  he  may 
hold  the  goods  for  the  purchaser  and  sue  him  for  the 
entire  amount  of  the  bill;  (3)  he  may  keep  the  goods 
and  sue  for  damages  to  cover  the  difference  between 


202  Sale  of  Inventions 

the  sale  price  of  the  goods  and  the  market  price  thereof 
at  the  time  the  contract  was  made. 

Payment.  —  A  check  is  not  legal  tender,  and  the 
man  who  takes  it  in  payment  of  goods,  does  so  at  his 
own  risk.  If  in  the  sale  of  goods  no  place  of  payment  is 
designated,  it  is  the  duty  of  the  purchaser  to  find  the 
seller  and  remit  to  him.  A  receipt  is  generally  con- 
sidered evidence  of  payment. 

Power  of  Attorney.  —  When  a  person  wishes  to  dele- 
gate to  an  agent  or  a  representative  the  right  to  tran- 
sact any  business  which  necessitates  signing  checks 
drawn  against  his  account  or  the  signing  of  papers 
which  carry  any  obligation,  he  issues  to  such  agent 
or  representative  a  written  power  of  attorney,  a  reg- 
ular legal  form  conveying  to  him  the  power  to  sign, 
placing  a  limitation  as  to  time.  Such  power  of  at- 
torney shall  be  in  force  as  the  circumstances  of  business 
may  require. 

If  one  party  agrees  to  stay  with  another  and  give 
services  and  the  other  party  does  not  agree  to  give 
payment  for  services,  the  agreement  is  void.  A  mere 
contract  to  sell  an  invention  to  a  prospective  buyer 
is  not  an  assignment. 

Hire  your  own  lawyer.  Do  not  be  tied  down  by 
onerous  contracts.  The  manufacturer  usually  in- 
sists on  his  own  attorney's  drawing  any  agreement. 
Consequently,  an  inventor  must  be  sure  that  the  legal 
phraseology  of  the  contract  follows  the  oral  arrange- 
ment already  made.  Never  under  any  circumstances 
sign  a  contract  until  you  have  submitted  it  to  com- 
petent counsel  to  whom  you  should  state  in  your  own 
language  your  understanding  of  the  arrangement. 
He  will  tell  you  whether  the  contract  follows  it  and 


Elementary  Contract  Laws  203 

also  whether  there  is  any  opportunity  for  a  future 
misunderstanding  owing  to  the  phraseology.  To 
detect  any  variation  will  mean  a  use  of  the  "  biter 
being  bit."  Any  price  the  attorney  reasonably  charges 
is  worth  the  service  rendered. 


CHAPTER  XXII 
MISTAKES  OF  INVENTORS 

X^jHAPTERS  could  be  written  on  mistakes  of 
I  .  inventors  and  patentees,  but  a  word  to  the 
wise  is  sufficient.  In  order  to  gain  the  ready 
ear  of  the  inventor  it  has  been  deemed  advisable  to 
correlate  and  assemble  here  various  suggestions  bearing 
on  all  the  topics  discussed  in  this  book.  They  are 
so  vital  and  all-pervading  that  they  had  best  be  con- 
sidered together.  The  inventor  who  carries  with  him 
the  precepts  herein  mentioned  may  obtain  more 
momentum  for  his  efforts  to  sell  his  invention  and 
may  have  his  eyes  opened  to  undreamed  realities. 

It  is  doing  the  right  thing  at  the  right  time  that 
marks  the  successful  inventor.  The  quickest  way 
in  which  this  can  be  done  is  to  avoid  doing  the  wrong 
thing  at  any  time.  Hence  this  is  a  chapter  on  don'ts. 

There  is  no  reason  for  an  inventor's  failing  to  ob- 
tain commercial  success  in  disposing  of  his  patent  at 
a  profit,  if  he  will  ascertain  what  is  necessary  for 
success.  This  is  a  day  of  short  cuts.  If  you  take 
the  long  way  round,  you  will  never  arrive.  You  must 
keep  moving.  Spend  your  time  and  money  on  money 
savers  rather  than  on  frills.  Do  not  fritter  away 
your  money  on  untried  schemes.  Always  get  the 
advice  of  a  specialist  before  you  entertain  high  hopes 
about  your  invention.  Visionaries  don't  count  these 
days.  Most  inventors  allow  nobody  enough  time  to 

204 


Mistakes  of  Inventors  205 

size  an  invention  up.  Don't  look  for  an  immediate 
success  unless  you  are  familiar  with  the  points  dis- 
cussed in  this  book,  for  every  successful  inventor  exem- 
plifies the  precepts  revealed.  Always  follow  your 
better  judgment  in  disposing  of  your  invention.  No 
doubt,  you  have  noticed  in  your  experience  that  every 
time  you  acted  against  your  better  judgment  you 
made  a  mistake.  That  is  to  say,  when  you  followed 
impulse  in  preference  to  a  cold,  calm  weighing  of 
facts,  you  found  you  were  wrong.  This  is  a  common 
experience  of  mankind.  Whenever,  in  an  unguarded 
moment,  you  became  over-enthusiastic,  no  doubt  you 
found  ,you  were  sitting  on  a  barrel  of  gunpowder. 

Some  inventions  drag  along  for  years  without  getting 
to  a  paying  stage  and  then  suddenly  make  fortunes 
for  their  owners  when  the  patent  is  almost  run  out. 
You  may  find  yourself  in  a  similar  position.  It  may 
happen  with  one  in  a  thousand,  but  you  may  be  the 
lucky  one. 

There  is  no  recognized  body  of  men  known  as  patent 
brokers  or  patent  agents  who  make  a  regular  business 
of  selling  inventions.  These  cannot  exist,  because 
such  a  business  would  require  a  diversity  of  knowledge 
and  quality  seldom  found  in  an  individual.  The 
selling  of  a  patent  requires  a  very  intimate  knowledge 
of  the  practical  side  of  the  trade  to  which  it  particularly 
relates.  No  man  can  claim  the  possession  of  such  an 
experience  in  every  trade. 

An  inventor  is  an  optimist,  for  a  pessimist  would 
not  invent  anything.  The  great  bulk  of  inventions 
are  improvements  which  enable  a  person  to  do  a  thing 
in  an  easier  way.  Other  inventions  are  revolutionary. 
The  real  inventor  is  almost  always  a  worthy  man, 


206  Sale  of  Inventions 

and  he  remains  honest  after  being  knocked  in  the 
head  incessantly.  Being  honest  himself,  he  believes 
all  others  honest.  Thus  he  sometimes  becomes  the 
victim  of  an  unprincipled  promoter;  this  is  the  un- 
fortunate part  of  it. 

Often  a  matter  of  a  fraction  of  a  penny  decides  the 
question  whether  the  article  will  be  a  commercial 
success  or  a  failure.  All  questions  of  cost  must  be 
fully  worked  out  by  the  inventor  so  that  he  will  come 
fully  armed  at  every  point  with  facts  and  figures,  not 
only  for  defense  but  also  to  carry  conviction  to  the 
mind  of  the  person  to  whom  he  speaks. 

The  worst  possible  thing  to  do  is  to  misrepresent  the 
actual  facts  or  figures.  Convince  yourself  first  that 
your  invention  will  be  a  success.  No  inventor  who 
has  tried  this  advance  investigating  work  has  ever 
been  sorry  for  it  after,  or  has  failed  of  success  in  secur- 
ing capital  when  he  has  exerted  himself,  especially 
when  his  invention  has  proved  meritorious.  Don't 
confuse  invention  and  financeering.  To  invent  is 
not  synonymous  with  get  rich  quick.  No  mechanical 
system  can  be  operated  at  a  hundred  per  cent  efficiency, 
as  you  know,  so  don't  make  such  extravagant  claims. 


CHAPTER  XXHI 

THE  SAFETY    VALVES  OF  MARKETING 
INVENTIONS 

f  |  AHE  way  to  wealth  is  as  plain  as  the  way  to 
market. "  If  depends  chiefly  on  two  habits: 
industry  and  frugality.  Waste  neither  time 
nor  money,  but  make  use  of  both.  "  Without  in- 
dustry and  frugality,  nothing  will  do  and  with  them, 
everything."  —  Franklin. 

"  Opportunities  exist  everywhere  for  men  who  are 
determined."  —  Governor  D.  Forrest  Richards. 

George  E.  Walsh,  a  successful  inventor,  said  that 
in  his  experience  he  had  been  a  little  over-enthusiastic, 
but  that  he  did  sell  inventions.  He  was  glad  to  sell 
a  game  and  puzzle  outright  for  $150,  only  to  find  out 
later,  to  his  great  disgust,  that  had  he  handled  the 
thing  right,  it  could  have  been  made  to  net  him  a 
hundred  thousand  dollars  which  others  actually  made. 
He  advises  the  inventor  either  to  make  his  invention 
himself  or  to  sell  it  on  a  royalty  basis.  Such  cases 
speak  volumes. 

An  inventor  offered  an  important  invention  to  the 
largest  paper  manufacturer.  He  turned  down  an 
insignificant  cash  offer  and  accepted  a  royalty  con- 
tract which  he  signed.  But  imagine  his  surprise 
when  he  found  that  the  company  failed  to  manufacture 
the  invention,  and  there  he  was  without  any  remedy  or 
recourse.  Here  was  a  typical  critical  situation,  a 

207 


208  Sale  of  Inventions 

lion  in  the  inventor's  path.  Years  and  years  passed 
with  the  situation  the  same.  Suddenly  he  awoke  to 
the  fact  that  he  had  failed  to  specify  in  the  royalty 
contract  the  time  when  the  thing  was  to  be  marketed. 
Now  there  are  no  sovereign  remedies  for  such  cases. 
By  acting  prudently  you  will  avoid  such  troubles. 

The  stationery  of  promoting  companies  is  usually 
all  that  could  be  desired;  indeed,  it  is  often  overawing 
with  its  names  of  officers  and  references.  Usually  a 
handsomely  printed  pamphlet  is  mailed  to  inventors 
which  makes  it  appear  as  if  the  company  had  handled 
practically  all  the  successful  inventions  of  the  day. 
In  this  way,  the  company  gets  many  patents;  some 
that  prove  valuable  are  gotten  rid  of  in  numerous  ways 
unknown  to  the  inventor.  But  enough  of  such  dis- 
heartening instances. 

There  are  probably  more  inventors  or  would-be 
inventors  at  work  in  this  country  than  there  are  doctors 
or  lawyers.  They  turn  out  tens  of  thousands  of 
practical  and  impractical  devices,  only  a  small  per- 
centage of  which  is  patented.  Not  all  may  prove 
successful,  but  the  money  earned  on  some  is  incal- 
culable. 

The  average  inventor  who  wishes  to  sell  an  interest 
in  his  patent,  say  a  half,  quarter,  or  eighth  interest, 
usually  makes  an  assignment  of  this  to  the  investor 
in  consideration  for  so  much  cash.  The  procedure 
is  disadvantageous  both  to  the  inventor  and  his  part- 
ner. It  makes,  in  fact,  an  undivided  and  indivisible 
partnership  which  leaves  either  party  free  to  deal 
with  the  invention  as  he  pleases  without  accounting 
to  the  other.  Now  it  makes  no  difference  if  you 
assign  a  one-hundredth  interest  or  a  one-half  interest 


Safety  Valves  of  Marketing  Inventions     209 

therein.  The  fact  is  that  either  of  you  can  proceed 
to  exploit  the  invention  without  accounting  to  the 
other.  In  this  condition  it  is  practically  impossible 
rto  negotiate  the  rights  of  either  separately,  and  the 
whole  cannot  be  sold  without  the  consent  of  both  or 
all  those  having  an  interest.  It  is  a  predicament 
from  which  reason  recoils. 

Either  party  can  grant  a  license  or  territorial  rights 
to  the  invention  without  the  consent  of  the  other  and 
without  accounting  to  him  for  the  profits.  In  so  doing, 
he  sells  only  of  his  own.  Thus  the  invention,  instead 
of  being  a  monopoly,  may  degenerate  into  a  competi- 
tion in  which  the  interests  of  both  are  wrecked;  or 
it  may  be  wrecked  from  your  failure  to  agree  upon 
the  manner  of  procedure.  When  both  parties  are 
reasonable  and  cooperate  fairly,  no  disadvantage  re- 
sults; but  friction  is  apt  to  occur  and  this  should  be 
avoided  by  inventor  and  capitalist.  The  way  out  of 
it  is  to  place  the  title  in  the  hands  of  a  trustee,  or.,  by 
incorporating  conditions  of  mutual  agreement  to  sell 
in  a  contract  of  assignment.  This  mode  of  contract- 
ing for  capital  is  largely  confined  to  cases  where  capital 
is  sought  to  perfect  inventions. 

An  invention,  however  clever,  cannot  be  exploited 
without  expense.  Of  this  the  expense  of  exploiting  is 
greater  than  the  expense  of  patenting.  Outside  the 
crop  that  grows  on  the  soil,  there  is  no  single  source 
which  has  produced  such  great  wealth  for  this  nation  in 
the  past  as  the  patent  system.  The  prime  stimulus  to  in- 
vention is  reputation.  The  fact  that  makes  men  work 
at  almost  anything  in  the  world,  when  they  are  men 
of  the  proper  stamp,  is  the  reaching  out  for  reputation 
and  credit  for  having  accomplished  something. 


210  Sale  of  Inventions 

An  inventor  has  imagination.  He  has  high  ideals 
and  has  people's  sympathy.  The  ordinary  run  of 
inventors  are  well  paid;  many  of  them  have  made 
large  returns.  Frederick  P.  Fish,  Esq.,  one  of  the 
foremost  patent  lawyers  in  the  country,  is  authority 
for  the  statement  that  inventors  as  a  class  are  better 
off  than  lawyers.  There  is  a  reason  why  they  should 
be.  They  do  financially  better  than  poets,  and  yet 
their  work  is  somewhat  in  the  line  of  poetry. 

In  the  course  of  a  few  years  a  good  invention  may 
be  superseded  by  one  that  is  better.  An  invention 
may  be  in  a  form  which  is  practically  worthless  until 
it  has  been  redesigned,  reshaped,  and  reorganized  so 
as  to  be  better  adapted  to  a  thousand  and  one  condi- 
tions that  the  inventor  very  likely  does  not  know 
anything  about. 

The  bad  feature  about  royalty  contracts,  which 
makes  an  outright  sale  preferable,  is  that  royalty 
agreements  make  it  necessary  for  an  inventor  to  watch 
the  business  very  closely,  and  that  he  usually  cannot 
do. 

Financing  an  enterprise  in  New  York  City  is  not 
an  easy  task,  as  the  writer  knows  from  his  own  ex- 
perience. He  made  an  invention  and  put  it  on  the 
market,  but  was  not  acquainted  with  the  best  market 
at  that  time.  It  cost  him  quite  a  little  fortune  to  get 
started.  You  must  come  armed  to  withstand  a  long 
siege,  although  it  is  possible  to  live  economically  in 
the  city.  The  people  of  New  York  are  very  cos- 
mopolitan; as  long  as  a  man  dresses  reasonably  well, 
they  care  not  how  he  lives  when  not  in  sight.  A  New 
York  banker  told  the  writer,  who  made  a  deposit  in 
the  former's  bank  with  a  view  of  beginning  the  market- 


Safety  Valves  of  Marketing  Inventions     211 

ing  of  his  invention,  that  "  every  inventor  comes  to 
New  York  attracted  to  the  city  like  a  magnet  and 
thinks  that  the  people  will  fall  for  his  invention.  They 
do  so  whether  or  not  there  is  likely  to  be  a  market 
for  the  article,  because  they  know  that  money  is 
plentiful  there."  Do  not  think  that  when  you  come 
to  this  city,  your  past  history  and  present  standing 
are  a  sealed  book.  This  is  not  the  case.  They  will 
look  you  up  through  some  commercial  agencies  or 
through  private  sources.  While  there  is  plenty  of 
money  in  New  York  City  for  good  enterprises,  the 
competition  among  the  latter  is  very  strong. 

George  M.  Reynolds,  President  of  the  Continental 
and  Commercial  National  Bank  of  Chicago,  a  leading 
banker,  says:  "  Nobody  can  make  a  fortune  by  saving 
money  from  a  salary  or  from  wages.  I  think  I  have 
never  accomplished  anything  big  in  my  life,  that  my 
friends  have  not  urged  me  to  take  a  different  course." 

A  man,  to  make  money,  must  think  for  himself. 
There  are  always  on  all  sides  people  ready  to  give 
advice.  Then  there  are  those  who  are  always  seeking 
advice.  It  is  better  to  fail  once  in  a  while  than  never 
to  have  the  courage  to  succeed.  Courage  is  as  much 
of  a  necessity  to  the  man  or  woman  who  wants  to 
build  up  a  fortune,  as  it  is  to  a  soldier  on  the  battle  field. 


CHAPTER  XXIV 

SUGGESTIONS  FROM  THE  AUTHOR  ON 

EVERY  PHASE  OF  SELLING 

INVENTIONS 

1.  After  a  man  once  gets  the  idea  that  he  is  capable 
of  bossing  instead  of  being  bossed,  we  say  to  him  he  might 
as  well  die  fighting  to  be  a  business  man  as  to  die  working 
at  some  job  which  to  him  is  nothing  but  slavery  if  it 
offers  no  means  of  advancement.     Be  it  far  from  us  to 
judge  a  man  by  his  past.    Most  of  us  have  "Histories." 
We  all  do  about  as  well  as  we  can  "  considering."    But 
from  to-day  on,  things  may  be  different. 

2.  Take  a  partner.    Do  your  best  for  two,   three, 
or  four  years,    then  sell  out  and  go  by  yourself.    We 
should  like  to  see  you  eventually  in  an  entirely  inde- 
pendent condition.     There  is  nothing  like  being  your 
own  boss.     Plans  in  this  book   are  intended  to  pave 
the  way  for  your  success  in  carrying  out  that  idea.     You 
can  cooperate  with    us.     You  should  find    men  with 
practical  suggestions  to  write  the  ads  and  letters  appro- 
priate to  the  nature  of  your  invention. 

3.  A  good  rule  for  every  inventor  is,  "  get  it  down  on 
paper."     This  is  not  only  done  for  the  information  of 
others  but  also  for  making  a  point  clearer  in  your  own 
mind. 

4.  When  you  need  aid,  first  seek  a  friend,  —  a  friend 
who  is  ever  ready  with  a  jolly  reply,  a  good  story,  a  happy 

212 


Suggestions  from  the  Author  213 

thought.  Take  such  a  friend  into  your  confidence. 
Be  very  sure  of  his  loyalty  first.  Study  your  plans 
together.  You  may  succeed  in  interesting  him.  He 
may  not  be  cleverer  than  you,  but  he  can  say  things  which 
would  not  be  appropriate  for  you  to  say  about  yourself. 
Two  heads  are  better  than  one.  More  than  one  friend 
should  hardly  be  necessary.  This  plan  is  for  one  who 
is  inexperienced,  bashful,  one  who  hates  to  take  a  turn- 
down. He  who  is  nervy,  ambitious,  unafraid,  courage- 
ous should  go  after  the  capital  himself  in  any  of  the  ways 
suggested. 

5.  Whom  should  you  choose  among  your  friends? 
Look  them  over  and  pick  out  the  one  whom  you  consider 
loyal,  clever,  and  withal  a  good  talker. 

6.  Advertising  for   partners   always   brings   a   per- 
centage of  replies  from  investors  who  have  plans  of  their 
own,  different  from  yours,  perhaps  better.     This  applies 
also  to  any  of  the  class  we  have  already  referred  to  as 
making  good  seconds   to   assist  you.     You  will  find 
that  they  have  plans.    Listen  to  them;  sift  out  the  bad 
ideas  and  accept  those  that  are  genuinely  serviceable. 

7.  Thinking  is  all  right,  but  action  only  makes  for 
success,  just  as  yeast  added  to  flour  makes  the  dough. 
Do  not  be  disheartened  if  your  proposition  does  not 
succeed  right  of  the  red. 

A  frequent  objection  to  starting  in  business  is  the  lack 
of  capital.  Possibly  your  lack  of  experience  in  your 
proposed  enterprise  has  kept  you  from  trying  for  capital. 

8.  Perhaps  you  have  tried  for  the  money  and  failed, 
have  become  discouraged  and  gone  back  to  the  old  place 
with  a  heart  as  heavy  as  that  of  Job  in  all  his  misery. 
That  experience  should  not  trouble  you  in  the  least. 
Other  men  have  suffered  the  same  defeat  and  then  turned 


214  S<de  °f  Inventions 

it  into  victory,  why  not  you?  If  you  have  su/ered  defeat 
and  humiliation  in  this  way,  there  is  alt  the  more  reason 
why  you  should  be  guided  by  the  counsel  and  advice  of 
those  who  know,  and  thus  save  yourself  further  sad 
experiences  of  a  similar  nature. 

9.  "  //  you  want  to  succeed  in  the  world,  you  must 
make  your  own  opportunities  as  you  go  on.     The  man 
who  waits  for  some  seventh  wave  to  toss  him  on  dry  land 
will  find  that  the  seventh  wave  is  a  long  time  coming. 

You  can  commit  no  greater  folly  than  to  sit  by  the  road- 
side  till  some  one  comes  along  and  invites  you  to  ride 
with  him  to  wealth  and  influence."  —  JOHN  B.  GOUGH. 

Money  raising  is  a  question  of  a  little  study,  applica- 
tion, and  patience-,  that  is  all  there  is  to  it.  Merely  a 
little  knowledge,  a  little  trying,  a  little  time,  and  the 
thing  can  be  accomplished. 

10.  The  secret  of  the  inventor's  success  is  never-ending 
application.     This   has   enabled   corporations   such   as 
the    National  Electric  Light  Association,  the  Western 
Etectric  Company,  etc.,  to  have  inventors1  departments. 

11.  Owing  to  the   European   war   there   have   come 
gala  days  for  the  inventor.     No  other  age  witnessed 
such  keen  rivalry  in  things  mechanical.     The  inventor 
must  supply  the  wants  of  man.    It  is  true  that  many 
ideas  of  the  utmost  commercial  importance  are  slumber- 
ing.   We  are  trying  to  make  the  inventor  a  better  busi- 
ness man  so  as  to  enable  him  to  help  himself  in  a  hun- 
dred ways  he  never  thought  of.     You  have  but  to  try. 
The  rewards  are  great  enough. 

12.  There  is  only  one  thing  in  the  word  "investor" 
which  distinguishes  it  from  the  "  inventor  "  and  that 
is  the  "  s."     This  "  s  "  stands  for  "  success."    Every 
inventor  should  understand  this  from  the  very  beginning. 


Suggestions  from  the  Author  215 

13.  Where  an  invention  can  be  put  to  several  different 
uses  and  can  be  used  in  different  lines  of  manufacture, 
deal  with  each  line  separately.     In  this  way  the  inventor 
can  kill  two  birds  with  one  stone  and  sell  two  compute 
patent  rights  while  owning  but  one  patent.     Thus  the 
manufacturer  of  flour  is  not  interested  in  cement,  so  if  the 
new  process  of  grinding  be  equally  applicable  to  both, 
the  patent  rights  might  be  sold  separately.     The  rights 
for  an  improved  line  reel  were  sold  separately  for  use  as 
a  clothesline  holder  and  for  a  surveyor's  tape,  while  the 
inventor  still  retained  rights  for  other  purposes,   e.g., 
as  a  fishing  tackle.     The  inventor  must  always  consider 
such  possibilities.     He  cannot  assign  certain  claims  of 
a  patent  without  at  the  same  time  assigning  the  entire 
patent. 

14.  The  inventor  should  retain  at  least  a  minority 
interest  in  the  corporation  organized  to  push  his  invention, 
even  if  in  addition  he  has  a  royalty,  this  in  order  to  have 
a  voice  in  the  management.    If  the  inventor  has  taken 
royalties  and  does  not  own  stocks,  his  contract  should 
make  proper  provision  for  protecting  his  interest,  e.g., 
causing  the  directors  to  consent  to  certain  actions  of  the 
corporation  affecting  the  inventor's  interests,  such  as  his 
right  to  inspect  the  books. 

15.  See  that  your  prices  are  reasonable.     Place  a  fair 
price  on  your  invention,  and  you  will  do  a  brisk  trade.    If 
you  charge  an  exorbitant  price,  your  sales  will  be  small  at 
the  beginning,  and  it  will  be  difficult  to  start  a  profitable 
business.    Besides,  high  prices  excite  competition  and 
infringement. 

1 6.  Over  six  hundred  million  dollars  are  spent  an- 
nually in  the    United  States  for  various  forms  of  ad- 
vertising.   Logical    advertising    methods    in    marketing 


2i6  Sale  of  Inventions 

inventions  will  always  triumph  sooner  or  later.  Cream 
will  always  rise  to  the  top;  water  will  always  find  its 
level.  ThereJ$  no  stopping  it.  The  successful  man  who 
advertises  is  no  slacker  when  it  comes  to  spending  money 
to  get  business.  Not  he.  "  The  sky's  the  limit"  is 
his  slogan. 

17.  //  your  invention  is  for  use  among  farmers,  the 
easiest  and  best  way  to  get  them  interested  is  to  get  up  a 
list  of  names  of  farmers  with  money  in  any  locality  you 
are  interested  in.    Such  a  list  would  not  cost  you  more 
than  an  average  of  $£  per  name.     The  important  thing 
about  this  plan  is  the  fact  that  the  farmers  you  go  after 
are  known  to  have  money  and  you  want  only  them.    One 
way  for  an  enterprising  inventor  would  be  to  write  a 
letter  to  the  assistant  cashier  of  the  bank  in  the  towns 
you  are  interested  in,  offering  $£  a  name  for  a  list  of 
local  farmers  of  standing.    When  the  list  comes  in,  have 
it  copied  in  triplicate  and  send  a  copy  to  the  justice  of 
the  peace  and  the  editor  of  the  newspaper  in  each  town 
asking  them  to  check  the  list  for  accuracy  and  to  add 
any  names  not  listed.    For  this  service  there  should  be 
enclosed  with  each  letter  a  check  for  one  dollar. 

1 8.  To  a  young  office  manager  came  the  opportunity 
to  purchase  the  patent  rights  of  a  household  specialty. 
Investigation  showed  a  ripe  field  for  the  article.     Ac- 
cordingly  he  roped  and  branded  his  opportunity.     He 
started  out  right  from  the  very  beginning  and  sent  out 
circulars  based  on  a  carefully  selected  and  verified  list 
of  names.     Each  circular  brought  back  orders.     Within 
a  month  the  business  found  itself.     This  seeming  marvel 
was  accomplished  simply  by  knowing  how  to  compile 
and  handle  lists  of  names. 

19.  Do  not  forget  that  for  every  inventor  defrauded 


Suggestions  from  the  Author  217 

by  the  manufacturer  there  are  scores  of  capitalists  who 
have  lost  fortunes  financing  impractical  inventions. 

20.  Eliminate   all  sentimental  feeling  in  connection 
with  your  invention.     Be  its  own  worst  critic.    Adjust 
your  viewpoint  towards  it  so,  that  instead  of  its  becoming 
a  part  of  you,  as  so  often  happens,  you  can,  figuratively, 
criticize  it   through  the  eyes  of  your  unfriendliest  ac- 
quaintance.    The  novi-ce  will  at  times  cover  up  a  known 
defect,  refuse  to  admit  it,  even  to  himself,  in  the  hope 
that  no  one  else  will  discover  it.    Get  that  line  of  reason- 
ing out  of  your  mind  instantly.     Every  invention  has  or 
will  develop  a  competitor.     You  may  be  sure  he  will 
find  the  defect.    What  is  the  use  of  deceiving  yourself 
when  to  do  so  results  to  your  own  misfortune? 

21.  //  the   inventor   has   confidence   in   the   money- 
making  possibilities  of  his  invention,  the  best  plan  will 
be  that  of  operating  the  invention  on  a  royalty  basis. 
In  considering  the  method  the  inventor  sometimes  fails 
to  recognize  the  fact  that  a  royalty,  if  sustained  in  amount 
year  after  year  during  the  life  of  the  patent,  is  the  same 
as  having  a  sum  of  money  invested  during  the  period, 
which  would  pay  in  interest  the  amount  of  royalty  received. 
Thus  if  the  royalty  amounted  to  $500  per  year,  it  is  the 
same  as  though  the  inventor  had  $10,000  invested  drawing 
interest  at  five  per  cent  per  annum  during  this  period. 

Licensees  do  not  need  exactly  to  ascertain  the  precise 
validity  of  a  patent,  for  they  are  not  buying  the  rights. 
They  are  merely  buying  the  use  of  the  invention.  Still 
they  will  want  to  know  whether  the  invention  can  be  used 
without  infringing  other  and  existing  patents. 

22.  The  seller  should  not  be  required  to  guarantee 
the  validity  of  any  patent.      That  the  patent  is  valid 
should  be  taken  for  granted  by  the  parties  and  therefore 


2i8  Sale  of  Inventions 

placed  at  the  commencement  of  the  deal  among  the  recitals. 
Even  the  United  States  Government  does  not  guarantee 
the  validity  of  every  patent  it  issues,  so  why  should  the 
inventor  do  this? 

23.  Size,  shape,  finish,  and  even  the  kind  of  con- 
tainer have  a  marked  influence  on  the  successful  distri- 
bution of  many  patented  articles.    When  distribution 
to  the  consumer  is  largely  through  middlemen  or  jobbers, 
suitable  size,  pleasing  shape,  and  handsome  finish  are 
frequently  the  deciding  factors  between  two  articles  ap- 
parently equally  operative  and  selling  at  about  the  same 
price. 

24.  Sometimes,  after  experiment  on  a  model,  the  entire 
nature  of  the  invention  is  changed.     We  have  in  mind 
an  inventor  who,  after  the  expenditure  of  much  time, 
thought  and  money,   evolved  a  successful  smoke  con- 
sumer which,  by  a  not  entirely  unnatural  process  in  a 
model  building  became  an  improved  furnace  feed.     Then 
by  a  very  singular  change,  the  former  smoke  consumer 
came  out  triumphantly  from  all  the  experiments  as  a  very 
effective  gas  stove.     This  was  patented,  manufactured, 
and  put  on  the  market  with  much  success. 

25.  Investors  object  that  the  largest  interest  in  an 
invention  enterprise  goes  to  the  promoters.    Some  years 
ago  a  valuable  little  invention  had  been  perfected  and 
was  ready  to  be  placed  on  the  market.     The  inventor 
offered  it  to  some  promoter  friends  for  $25,000  worth 
of  stock  of  the  company  they  were  to  organize.     Had 
these  friends  been  reasonable,  they  would  have  capitalized 
it  ai  a  figure  somewhat  commensurable  with  the  amount 
to  be  paid  the  inventor,  and  the  invention  would  have 
attained    the    success    it    merited.    But    the    promoters 
promptly  capitalized  the  enterprise  on  the  unwarranted 


Suggestions  from  the  Author  219 

basis  of  $100,000.  Of  this  amount  $25,000  was  to  go 
to  the  inventor  and  $25,000  to  be  sold  for  working  cap- 
ital. The  remaining  $50,000  worth  of  stock  was  to 
come  to  themselves.  The  enterprise  naturally  came  to 
grief,  not  from  any  lack  of  merit,  but  simply  because 
the  overcapitalized  offering  was  not  attractive  to  men  with 
money. 

26.  If  a  manager  is  to  give  his  time  to  the  operation 
of  the  business,  a  demand  for  reasonable  salaries  or  stock 
compensation  is  fair. 

27.  Six  or  eight-line  "  ads "  are  as  a  rule  worse 
than  useless.     The  only  responses  in  many  cases  come 
from  people  who  offer  to  find  capital  for  the  advertisers. 

They  are  not  reliable,  as  the  writer  found  when  he  tried 
this  expedient  in  New  York  City.  Do  not  appeal  to 
the  houses  that  advertise  they  can  secure  capital.  They 
want  advance  fees,  always  demand  money.  If  the  enter- 
prise is  not  incorporated  they  will  tell  you  to  incorpor- 
ate. If  it  is  already  incorporated,  they  suggest  rein- 
corporation.  They  tell  you  to  get  an  issue  of  bonds  and 
to  take  out  foreign  patents.  They  all  want  retainers. 

28.  Does  advertising  pay?     There  are  around  two 
million  stores  in  the  world  to-day,  and  three  fourths 
of  them  advertise.    It  does  not  seem  likely  that  they 
would  pay  for  something  of  no  value.     There  are  over 
one  million  periodical  publications  in  the  world,  ninety- 
nine  per  cent  of  which  are  supported  by  advertising  and 
could  not  exist  without  it.    Are  they  receiving  money 
for  something  of  no  value?    We  do  not  think  so.     The 
larger  city  papers  carry  columns  of  financial  advertising 
every  day,  most  on  Sunday.    Many  of  them  have  several 
pages  of  such  notices.    One  page  costs  for  one  time  from 
a  thousand  dottars  down.    Investors   read  the  papers 


220  Sale  of  Inventions 

and  look  for  opportunities,  just  like  the  rest  of  us  mortals. 
Investors  want  more  money,  because  the  more  money 
one  gets,  the  more  uses  he  finds  for  it  and  the  harder  he 
will  try  to  obtain  it. 

29.  The  successful  inventor  is  not  a  one-idea  man. 
He  must  be  on  the  watch  for  "  something  better  "  all  the 
time  until  he  and  his  expert  advisers  are  convinced  by 
actual  tests  in  actual  service  that  the  invention  is  ab- 
solutely right  in  every  way.     The  successful  invention 
of  to-day   dominates   its  particular  field.     Why?    Be- 
cause it  is  better  than  others. 

30.  A  patent  may  be  wholly  without  value  during  its 
life.     Then  some  economic  change  may  occur  after  it 
expires  which  will  render  the  unprotected  invention  of 
great  value. 

31.  Some   patented   inventions   are   purchased    even 
though  they  are  of  no  commercial  value.     Their  only 
value  lies  in  the  fact  that  they  contain  some  ideas  which, 
combined  with  other  ideas,  will  result  in  an  entirely  new 
machine. 

32.  A  patented  article  often  has  a  secondary  value  to 
a  manufacturer.     This  lies  in  the  advantage  the  public 
finds  in  patented  articles.     They  prefer  to  buy  these 
goods ',  and  while  they  really  give  more  money  for  them 
than  for  other  goods y  still  the  maker  is  able  to  sell  a  line 
of  goods  below  the  market  price  because  of  this  increased 
patronage. 

33.  Edison  says  that  most  large  firms  prefer  to  buy  a 
patent  outright.    We  quote:    "  Although  I  have  taken 
out  more  than  a  hundred  patents,  I  never  had  more  than 
one  under  a  royalty  agreement  that  I  recall" 


INDEX 

ACCEPTANCE,  necessary  to  offer,  197, 198 

silence  as,  198 

ADVANCE  investigation,  when  necessary,  206 
ADVANTAGES,  tabulation  of,  36 
ADVERTISING,  capital  raising  by,  no 

lack  of  effective,  no 

newspaper,  168 

promoter  sharks,  method  of,  152,  153 

quickest  method  of,  167 

retail  dealer,  84 

when  to  enlist  service  of  expert  in,  i6a 
AGE,  success  independent  of,  57,  58 
AGENCIES,  fostering  and  selling  inventions,  125 
AMERICA  w.  EUROPE,  after-war  conditions,  86,  89 
AMOUNT  of  money  needed  govern*  costs  of  replies,  170 
APPROACH,  how  to  make  toward  prospects,  188 
ARGUMENTS,  answering,  of  competitors,  35,  36 
ARTICLE,  condition  of,  influencing  demand,  62 

factors  of  which  influence  demand,  61 
ASSIGNMENTS,  conditions  and  formalities  of,  166 

example  of,  illustrated  by  paper-box,  131,  132 

outright  sale  of  patent  by,  130 

protective  provisions  of,  131 
ATTENTION,  how  to  get,  of  prospect,  187-188 
ATTITUDE,  getting,  of  prospects,  95 
ATTORNEYS,  royalty  contracts  should  be  drawn  by,  133 

when  indispensable  to  inventor,  164 

BICYCLE  taken  as  object  lesson  in  claim  writing,  Chapter  5 
BOARD  or  DIRECTORS,  importance  of  choosing  good,  179 
BONDS  AND  SHARES  o*  STOCK,  difference  between,  181 
BURDEN  of  proof  of  showing  merit,  108 
BUSINESS,  fit  for,  men  must  be,  190 

invention  must  be  pursued  like,  22 

knowledge,  inventor  should  gain,  192 

221 


222  Index 

law,  necessity  of,  to  inventor,  96 
selling  invention  is  a,  28,  29 
subjects  inventor  should  be  familiar  with,  104 
working  up,  in  inventions,  120 
BRANDEIS,  JUSTICE,  and  opinion  on  inventions,  60 

CALL,  making  personal,  to  explain  invention,  116 
CANADA,  means  adopted  by,  for  scientific  research,  125 
CAPITAL,  confidence  necessary  to  raise,  55 

obtaining,  from  small  beginnings,  29,  30 

prospectus  to  raise,  when  necessary,  121 

raising,  not  hard,  105 
CAPITALIST,  eager  to  invest  in  right  article,  5  7 

should  pay  expenses  of  a  model,  51 
CAPITALIZATION  of  corporations,  175 
CAPITAL  STOCK,  when  issued,  full  paid,  182 
CAUSES  of  failure  to  raise  capital,  no 
CITY,  demand  creation  as  affected  by,  64,  65 
CLAIMS,  broad  vs.  specific,  42 

broad  should  not  be  too  sweeping,  45 

definite,  example  of,  47,  48 

definition  of,  41 

excessive,  should  be  avoided,  in 

function  of,  41,  42 

good,  protect,  2 

misleading,  also  misdescriptive,  46 

operative  structure  defined  by,  44 

redundant,  example  of,  49 

theory  of,  6 

CLASSES  who  invest,  112 
CLASSIFYING  buying  public,  136 

COMMERCE,  after-war  preparation  for  extension  of,  87,  89 
COMMERCIAL  AID,  necessity  of,  for  contracts,  164,  165 
COMMISSIONER  or  PATENTS,  60 
COMPETITION,  is  always  present,  79 

competitors'  point  of  view  in,  35,  36 

good  for  business,  73 

merit  vs.,  3 

patent  claims  and,  2 

COMPETITORS,  estimating  number  of,  in  given  locality,  63 
CONDITION,  assignment  in  contracts,  165-166 

control  of  corporation  obtained  by,  177,  178 
CONFIDENCE,  inventor  should  have,  102,  103 


Index  223 


inspiring,  HI 

success  obtained  by,  56,  57 

CONFLICTING  IDEAS,  shutting  out,  from  prospects,  188 
CONSIDERATION  in  contracts,  199 
CONSUMER  decides  market  for  article,  70,  71 
CONSUMPTION  of  articles,  special  factors  controlling,  69,  70 
CONTRACTS,  assigning  inventions,  163 

consideration,  199 

corporation  organized  under,  177,  178 

law  of,  196 

partnership,  172,  173 

CONTROL  OF  CORPORATIONS,  how  given,  176,  177 
CONVICTION,  how  to  instil  in  prospect,  188 
COOPERATION  between  inventor  and  investor,  38,  59 
CORPORATION,  conditions  of  starting,  177-178 

kinds  of,  174 

when  desirable,  182 

CORRESPONDENCE,  interesting  people  by,  159 
COST,  estimating  of  inventions,  81,  14,  15,  16 

of  models,  17 

COURAGE  of  conviction  an  asset,  211 
COURTS,  attitude  of,  on  price  fixing,  72 
CREATING  demand  for  inventions,  61 
CRITICS,  inventor  should  listen  to,  72 

DEALER  must  be  kept  supplied  with  article,  52 
DEFECTIVE  PATENTS,  10,  u 
DEFINING  limitations  in  claims,  7 
DEMANDS,  necessity  of,  for  invention,  61 

should  regulate  supply,  62,  63 

trade  conditions  influenced  by,  75 
DEMONSTRATION,  necessity  of,  52 

personal,  126,  127 
DEPRECIATION,  19,  20 

DEVELOPING  inventions  by  a  regular  stage  of  operations,  53,  54 
DISTRIBUTION,  of  patented  articles  in  foreign  countries,  90 

EDISON,  inventors  should  pattern  after,  193 
EDUCATING  the  public  as  to  fixed  prices,  72 
EFFECTS,  evil,  of  partnership  agreement,  173,  174 
ENFORCEMENT  of  resale  contracts,  73 
ENTERPRISE,  questions  affecting,  98,  102 
EQUIVALENTS,  how  claims  cover,  46 


224  Index 

ESSENTIALS  of  partnership  agreement,  172,  173 
ESTABLISHED  BUSINESS,  needing  money,  156 
ESTIMATING,  cost  of  introducing  article  to  public,  82 

price  and  cost  generally,  15 
EXAMINERS,  Patent  Office,  5 
EXCHANGE,  value  of  assignment,  13$ 
ExcLUsrvENESS,  essence  of,  in  patents,  i 
EXHIBITION,  demonstrating  inventions  at,  127 
EXPENSE,  estimate  of,  for  starting  factory,  704 
EXPERIENCE  and  knowledge,  necessary  to  win  out,  119 
EXPERIMENT,  manufacturer's  article  is  first  an,  77 
EXPERTS,  who  are,  to  pass  on  merit,  23,  24 
EXTENSION  of  foreign  trade,  remedy  for  overproduction,  87 

FACTORS,  determining  price  of  invention,  3 

furnishing  talking  points  about  inventions,  38 

FACTORY,  overhead  expenses  in,  78 

FAILURE,  to  raise  capital,  no 

to  obtain  replies  from  ads,  170,  171 

FINANCIAL  ADVERTISING  pays,  168 
assistance,  inventors  need,  51 
men  willing  to  back  sound  enterprises,  114 

FIRMS,  big,  buy  up  inventions,  58 

FrvE-AND-TEN-CENT  ARTICLES  and  the  market  therefor,  12 

FIXED  PRICE,  who  gets  the  benefit  of,  72 

FOLLOW-UP  LETTERS,  how  to  be  prepared,  151,  160 

FORM  and  substance  of  prospectus,  123 

FORMULA  for  ascertaining  sale  of  an  article,  61,  62 

FORTUNES,  made  on  simple  inventions,  25,  26 

FOUNTAIN  PENS,  featuring  talking  points  of,  38 

FRAUD,  when  it  vitiates  a  contract,  200 

FUNDS,  raising,  what  to  consider,  104 

FUTURE,  big  firms  cash  in  on,  62,  63 

GLOVES,  taken  as  example  of  sales  opportunities,  63,  70 
GOOD  WILL  of  capitalist,  necessary  to  gain,  109 

HELP,  how  to  use,  of  others,  58,  59 

self-,  requires  training,  58,  59 
HONESTY  of  inventors,  205,  206 

IMPLIED  licenses,  nature  and  character  of,  165 
IMPORTS,  increase  of,  since  the  war  began,  85 


Index  22$ 

IMPRACTICABLE  structure,  example  of  claim  covering,  49—50 
INCOME,  of  inventors,  240 
INCORPORATION,  essentials  of,  182 
INEXPERIENCED  INVENTOR,  how  he  proceeds,  149 
INFLUENTIAL  MEN,  when  they  join  with  inventors,  157 
INFORMATION,  investors  want  full,  101 

which  must  be  supplied,  95 

INFRINGEMENTS,  theory  of,  as  defined  in  patent  claims,  6 
INITIAL  OUTLAY,  get  investor  to  make,  141 
INJURY,  caused  by  price-cutting,  72 
INSURANCE  MAN,  when  to  use  services  of,  161,  162 
INTERNATIONAL  RELATIONS  after  the  war,  89 
INTEREST,  in  corporation,  fixing  by  shares  of  stock,  175 

in  corporation,  investors  want,  147 

undivided,  208,  209 

INTERESTING  men  of  special  knowledge  in  inventions,  156,  157 
INVENTIONS,  dependency  of  various,  32 

difference  between  simple  and  complicated,  30,  31 

six  cardinal  tests  of,  n,  12 

protecting  inventions,  8,  10 
INVENTORS,  capitalists  should  cooperate  with,  51 

places  where  they  flourish,  76 

position  of,  in  world  of  affairs,  108 
INVESTIGATIONS,  investor  wants  time  for,  69 

work,  necessity  of  for  inventor,  206 
INVESTMENT  standpoint,  royalties  regarded  from,  74,  75 
INVESTORS,  why  they  fail  to  back  inventions,  114 

JOINT  OWNERS,  of  undivided  interest,  advantages,  136 
JOINT  OWNERSHIP,  how  to  overcome  obnoxious  features,  36 

LABOR  of  others,  utilizing  the,  106 

saving  machinery,  will  attract  investors,  115 

MAGNETISM,  personal,  necessary  for  success,  57 
MAILING  LISTS,  how  to  compile,  137 
MANAGEMENT,  merit  in  article  calls  for  good,  29 
MANAGER  essential  to  business,  122 
MANUFACTURER,  as  a  prospect,  73,  74 

cutting  out,  in  selling  article,  39,  40 

inventor  should  be,  117 

on  lookout  for  good  articles,  106 

prospect,  handling  the,  144 

what  he  considers  in  buying  patents,  4 


226  Index 

MANUFACTURING,  estimating  the  cost  of,  104 
MARKET,  adjustments  to  conditions  of,  87 

enlarging,  for  groups  of  articles,  91 

must  be  considered  before  applying  for  patent,  80 

necessary  to  create,  for  inventions,  62 

practical  considerations  of,  n 
MEN  OF  AFFAIRS,  capitalists  are,  115 
MERIT,  buyers'  and  sellers'  views  on,  24 

prerequisite  in  modern  times,  27 
MODEL,  after  making,  first  thing  to  do,  53 

cost  of,  17 

putting,  in  trim,  52 

should  be  simple  and  inexpensive,  52-53 

when  impractical  to  make,  52 

when,  should  be  made,  51 

MODEL  MAKER  may  assist  in  making  estimates,  17 
MONEY,  good  inventions  have  made,  48 

in  bank,  do  not  expect  investors  to  put,  146 

partnership,  kept  intact,  171 

plenty  of,  for  investment,  113 

spending,  to  get  initial  results,  no,  in 
MONEY  QUESTION,  talking  over,  with  investor,  142 

NAMES  of  possible  prospects,  where  to  get,  137, 138 

NET  PROFIT,  figuring  it  up,  190,  191 

NEW  CONCERN  better  than  old,  to  push  inventions,  130 

NEWSPAPER  advertising,  of  inventions,  128 
placing  an  ad  for  capital  in,  167,  168 
Sunday,  when  good  to  patronize,  169 

NEW  YORK  CITY,  financing  inventions  in,  210,  211 

NOTICE,  newspaper,  how  to  get  it,  128 

OFFER,  and  acceptance  in  contracts,  197 

must  be  communicated  to  bind,  197 
OFFICE,  visiting  business  men  in,  116 
OPINION,  of  inventions,  who  are  entitled  to  render,  24 

rendered  on  merit  of  invention,  24 
OPTIMISM  necessary  to  success,  57 
OVERCAPITALIZATION,  when  necessary,  179,  180 
OVERHEAD,  how  it  enters  into  price,  18 
OVERPRODUCTION,  remedy  for,  87 
OVERSTATEMENT  should  not  be  made  in  prospectus,  12 


Index  227 


PARTNERSHIP,  more  wieldy  than  corporation,  171 

when  best  to  push  new  article  by,  155 
PARTNER,  example  of  unsophisticated,  173,  174 
PATENT  ATTORNEY,  service  to  be  required  of,  8 
PATENT  BROKERS,  25 
PATENT  OFFICE,  and  patent  attorney,  5 

recording  assignments  in,  116 
PATENT  SHARKS  and  their  methods,  152, 153 
PATENTS,  establish  boundaries,  5 

foreign,  advantages  of,  90 

greatest  source  of  wealth,  92 

model  should  come  within  terms  of,  53 

prices  of,  14,  15,  16 
PAYMENT,  made  to  promoters,  179 

under  contract  law,  19 
PERSONALITY  necessary  in  business,  no 
POLICY,  business,  inventor  must  have,  99 
POORLY  constructed  model,  143 
POSITION  of  inventor  in  world  of  affairs,  108 
POSTMASTER,  how  he  revises  mailing  lists,  21 
POWER  OF  ATTORNEY,  how  made  and  effect,  2 
PRACTICAL  MAN,  always  choose,  173 
PREFERRED  STOCK  vs.  bonds,  177 
PRICE  OF  PATENTS,  danger  of  overestimating,  16 

making  due  allowances,  16 

what  determines,  14,  15 

PRINTED  MATTER  as  means  of  broaching  new  article,  129 
PRIOR  PUBLICATION  abroad,  90,  91 
PRODUCERS  and  price-fixing,  72 
PROFESSIONAL  MEN  who  make  promoters,  54 
PROFITS,  earned  on  inventions  after  patent  expired,  91 

forestalling,  181 

inventor  should  talk  to  investors,  64 

made  on  staple  articles,  107 

selling  surplus  goods,  188 

post-patent,  83 

PROHIBITION  of  price-fixing  methods,  72 
PROMOTER  SHARKS,  advertisements  of,  152,  153 

part  played  by,  hi  organizing  corporations 
PROPERTY,  nature  of  patent,  92 
PROSPECTS,  classification  of,  188 

interest,  talk  hi  favor  of,  187,  188 

must  be  made  to  think  right,  186 


228  Index 

PROSPECTUS,  appearance  and  contents  of,  122 

how  to  emphasize  statements  in,  121 

patent  should  accompany,  121 

things  to  be  considered  in,  121 
PROTECTION  of  good  will  by  price-fixing,  72 

patent,  necessity  of,  93 

when  a  patent  really  protects,  10 
PUBLIC,  are  not  fools  as  is  supposed,  71 

educating  the,  in  merits  of  article,  39 

vs.  private  promoting  of  enterprises,  151 
PURCHASERS  of  patents  and  defective  patents,  9 
PUSHING  AN  ARTICLE,  three  factors  which  govern,  12,  13 

QUALITIES  a  partner  should  possess,  171,  172 
QUESTIONS,  affecting  demand  for  inventions,  62 

covering  every  feature  of  enterprise,  98,  102 

investor  may  ask,  103 
QUICKEST  METHOD  of  succeeding  is  by  advertising,  167 

RAISING  capital,  not  as  hard  as  it  looks,  105 

how  inexperienced  inventors  proceed,  149 
RANK,  of  inventor  in  world  of  affairs,  108 

of  rival  manufacturers,  67,  68 
REASONING  of  the  price  cutter,  84 
RECORDING  assignments  in  Patent  Offices,  72 
REDESIGNED,  many  inventions  have  to  be,  210 
REFERENCES,  when  to  submit  Patent  Office,  106 
RELATIVES,  when  to  be  approached  in  financing  inventions,  74 
REMEDIES  for  breach  of  contract,  201,  202 
RENT,  payment  of  by  investor,  36 
REORGANIZATION  of  corporation,  to  fix  value,  176 
REPLIES,  cost  of  newspaper,  average,  170 

from  classes  of  advertisers,  170 
REPUTATION,  inventor  strives  for,  209 
RESALE  PRICE,  5,  72 

RESERVE  FUND,  maintaining  a,  for  patent  depreciation,  20 
RETAILING  of  simple  five  and  ten-cent  articles,  13 

when  good  to  sell  patent  to  a  retailer,  39-40 
RETAIL  STORES,  patented  articles  require  outlet  through,  82 
RIDICULE,  subjecting  the  inventor  to,  107 
RIGHT  to  use  an  article  in  conjunction  with  another,  165 
RIGHTS,  of  an  agent,  198,  199 

how  prior,  are  innocently  defeated,  91 


Index  229 


RISKS  of  manufacturers,  106 

ROYALTIES,  basis  upon  which  are  estimated,  101 

factors  influencing  amount  of,  75 

when  small,  are  preferable,  74 
ROYALTY  contracts  require  watching,  210 

SAFETY  RAZOR  under  hammer  of  perfection,  30 
SALES,  contract  of,  passing  of  title  under,  16 

total  normal  quota  of,  67,  68 
SALES-LETTERS,  equivalent  to  salesmen,  83,  84 

how  they  should  be  prepared,  129 
SAVING  of  cost  where  pennies  count,  206 
SCIENTIFIC  RESEARCH,  125 
SCIENTISTS,  3 

SELECTION,  of  newspapers  in  which  to  advertise,  169 
SELLING  ARTICLES,  how  a  sale  is  made  hi  the  mind,  184,  185 

obtaining  the  right  attitude  of  prospect,  185 

prospect's  interest,  talk  in,  185,  186 

SELLING  MECHANISM  includes  jobbers,  dealers  and  inventor,  78 
SHARING  control  of  new  enterprises,  145 
SHOP  RIGHTS  explained,  134 
SHORTSIGHTEDNESS  of  learned  men,  107 
SHOW  WINDOWS,  personal  demonstration  in,  127 
SILENCE,  as  acceptance  in  contracts,  198 

examples  of  simple  inventions,  25,  26 
SIMPLICITY,  as  attested  by  some  good  sellers,  13,  14 
SMALL  INVESTORS,  160,  161 

manufacturer,  62 

SOLICITING,  personal,  to  interest  others  hi  invention,  158 
SPECIALTY  SALESMAN,  operations  of,  91 
SPREADING  OUT  in  selling  policy,  26 
STAPLE  ARTICLES  vs.  patented  articles,  39 
STATEMENT  of  invention,  how  received  when  oral,  68 
STATUTE  OF  FRAUDS,  hi  regard  to  sales,  200 
STOCKS  vs.  bonds,  difference  between,  77 
STOCK-SELLING,  how  to  facilitate,  182 
STUDY  DEPARTMENTS  of  big  firms,  62-63 

SUCCESSFUL  OPERATION,  how  inventions  stand  the  test  of,  31,  32 
SUGGESTIONS,  making  proper  use  of,  141,  142 
SUNDAY  NEWSPAPER  advertising,  list  of  papers,  169 
SUPERIOR  article,  what  makes  an  article  a,  28 

feature  conferring  merit  hi,  29,  30 
SUPPLY  of  article  must  be  steady,  71,  72 


230  Index 

TALKING  POINTS,  of  articles  in  general,  35,  36 

of  inventions,  35,  36 

TERMS  and  stipulations  of  promoters'  agreement,  63 
TERRITORIAL  rights,  selling  advantages  of,  134 
TESTIMONIALS,  obtaining,  to  boost  inventions,  29 
THOUSANDS  of  inventions  made  yearly,  32 
TIME  to  develop  ideas,  22 
TITLE,  when  it  passes  under  contract,  200,  201 
TONE  and  individuality  of  sales  letter,  159 
TRADE,  exhibits,  demonstrating  in,  127 

extension  of,  after  the  war,  89 
TRAINING,  necessity  of,  for  success,  56,  57 
TRAVELING  SALESMAN,  when  to  obtain  cooperation  of,  145 
TYPES,  of  corporations,  174 

of  inventions,  30 

UNDIVIDED  interest  bugaboo  of  assigning,  208,  209 

UNITED  SHOE  MACHINERY  Co.,  policy  of,  ground  for  its  prestige,  no,  in 

USE  OF  INVENTIONS,  instances  of,  15 

may  furnish  talking  points,  38 

value  of,  14 
USING  SERVICES  of  others,  the  advertising  man,  162 

the  insurance  man,  161 

the  lawyer,  162,  163 

the  reporter,  161 

VALUE  OF  INTEREST,  in  undertaking,  176 
VICTIMS  of  unscrupulous  promoters,  26 

WANTS  of  America,  to  come  first  after  the  war,  24 
WAR,  trade  extension  after  the,  2 
WATCHING,  royalty  contracts  require,  210 
WORK,  invention  should  be  put  to,  119 
WORKING  INVENTION,  money  needed  for,  134,  135 

under  patent  license,  68 
WRITING,  contract  must  be  in,  when,  200 


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